Nvidia: ChatGPT is responsible for stock price increases

Nvidia shares rose 12 percent. since the publication of the results for the fourth quarter of 2022, and since the beginning of the year - by as much as 62 percent. The increase in price is due to the increasing demand for chips to support artificial intelligence and applications such as Chat GPT. The requirements related to the support of artificial intelligence will now drive the development of many companies in the IT industry.

Nvidia experiencing another youth?

Nvidia is currently one of the world's largest producers of integrated circuits, including advanced graphics systems. The company owns over 90% of share of the global graphics chip market, which means that if you are reading this text on a computer screen, it is very likely that the processor designed and manufactured by Nvidia is responsible for displaying it. However, in recent years, processors from this manufacturer have found many additional applications, and one of them was mining cryptocurrencies, for which graphics chips are best suited. Demand from miners was so great that it caused shortages in the market of some graphics cards. Then came the pandemic, which further increased the demand for modern graphics cards, as gaming became one of the most popular pastimes in people's homes.

As the pandemic ended and microprocessor shortages disappeared, Nvidia's share price began to fall. In less than a year, the price per share fell from almost $330 (November 2021) to $110 (October 2022). Now, however, the shares are rapidly gaining value again - they have already increased by 62% since the beginning of the year. This is due to the company's good results and the use of its chips for service artificial intelligence (AI).

Investors quickly noticed that the rise in popularity of new AI-based applications, such as ChatGPT, was increasing the need for the hardware necessary to support this technology. Nvidia makes graphics chips specifically designed to handle the complex computations required to power AI applications. With the growing popularity of ChatGPT, the OpenAI company that creates it needs more and more computing power to generate answers to the huge number of queries it receives. And the queries range from students trying to help themselves with writing essays to programmers solving code problems. As AI finds widespread use, this increases the need for powerful hardware capable of handling complex computing tasks. AI is currently one of the most important directions of the company's development. Nvidia wants to help companies break into the AI ​​field by partnering with several major cloud service providers and offering it as a service on its own platform.

AI as a chance for Nvidia to improve results

Nvidia posted an EPS (earnings per share) of $0,88 in the fourth quarter, 8 cents above analysts' expectations. Quarterly revenue fell 21 percent. compared to the same period last year, however, revenues of $6,05 billion beat market expectations by $30 million. The company's annual revenue was $27 billion. In the first quarter of this year, Nvidia expects $6,5 billion in revenue, and artificial intelligence is expected to become an increasingly important item in the company's revenue. The demand for technologies related to artificial intelligence in the coming years will improve the results of many other companies in the IT industry.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.