This analysis was first published in SvD Näringsliv, in Swedish, on May 23rd, 2024. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.
As the world invests in AI, the money flows heavily into Nvidia’s pockets. The world’s hottest company is now approaching a point where expectations become very hard to live up to — and the drop if they fall short is enormous.
Jensen Huang has the best problem a public company CEO can have. Since the start of the year, the share price has risen more than 98 percent — a performance few companies of that size can claim, and this after an already extraordinary run of several hundred percent the year before.
When the quarterly report came on Wednesday evening, Huang had to prove that the surge was deserved — and that it was merely the start of Nvidia’s journey. It proved to be no problem at all. Nvidia beat the high expectations and set new revenue records. Revenue tied to data centres rose by 427 percent compared with the previous year, while total sales grew 262 percent. The share crossed 1,000 dollars in after-hours trading for the first time ever, and Nvidia announced a 10-for-1 stock split.
It is unusual for something as technical and complex as a chip company to attract this level of attention. Other companies name-drop Nvidia’s products when describing their own businesses. Customers boast publicly about having managed to get hold of the chips at all. Jensen Huang should pinch himself. This does not normally happen.
Nvidia has become virtually synonymous with AI development. Talking about their products is a way of signalling that you take AI seriously and have the resources to invest. Like the verb “to Google,” Nvidia could have become the AI equivalent — if only its name were not so unfortunate (it derives from the Latin “invidia,” meaning envy). In an era when the market is searching for efficiency gains and new revenues via AI, Nvidia functions as a kind of alibi you can invoke. Nobody buys these expensive chips without intending to build AI services — and that makes you a company that is keeping pace.
This makes Nvidia’s revenues a kind of barometer for the entire AI development. Over 26 billion dollars — around 278 billion kronor — in revenue during the first quarter suggests the boom has no end in sight. When Alphabet reported its quarterly figures a month ago, CFO Ruth Porat said something telling: “The significant growth in capital expenditure (capex) over recent quarters reflects our confidence in the opportunities AI presents.” Alphabet is making enormous investments to build AI services — and the “capital expenditures” Porat refers to include Nvidia in large measure. Other companies’ investments are, in other words, Nvidia’s revenues. When the market looks ahead to a potential technology paradigm shift, this is a formidable strategic position to occupy.
Nvidia was last to report among what are usually called the “Magnificent Seven” — the seven major tech companies that have been the engine of the entire market. Apple and Tesla have been disappointments this year, but the remaining five — Alphabet, Meta, Amazon, and Microsoft — have all continued their climb. The other six are relatively independent of each other, competing in certain areas. Nvidia, however, supplies them all. Its customer list is formidable, including several of the world’s largest companies.
The challenge going forward resembles the one Huang faced on Wednesday evening. How much better can a company go when it is already going this well? And how far behind are competitors’ products, really? “The next industrial revolution has begun,” Huang said, sounding both triumphant and self-assured. With a share price that has risen more than 2,500 percent over the past five years, that is understandable. But with each quarter, expectations become a backpack that grows heavier to carry. It is not enough for Nvidia to deliver what it has promised — it must exceed expectations in the biggest tech frenzy in years.
Should the world’s appetite for investment cool — or if competitors catch up — the barometer could quickly swing to storm. In that scenario, Nvidia’s dramatic rise could become a fall from a height that is very hard to manage.
