Nvidia Made $6 Billion in Profit from AI

Nvidia's stock is on the rise, and for good reason. The company's latest quarterly earnings report was nothing short of spectacular. But as with any earnings call, the real intrigue lies not in the numbers of the past quarter but in the hints, clues, and insights into what's coming next. Let's unpack the key takeaways from Nvidia's recent earnings call, where CEO Jensen Huang and CFO Colette Kress provided a glimpse into the company's future.

Supply Bottlenecks: A Persistent Challenge

The supply of Nvidia's graphics processing units (GPUs) continues to be a pressing concern. Huang and Kress were cautious in their comments, reiterating that chip supply is expected to increase each quarter into next year. But this is hardly a departure from previous quarters, and the vagueness of their statements offers little comfort to AI startups desperately seeking GPUs.

The supply chain is complex, and Nvidia's dependence on various suppliers has led to bottlenecks. But there's a ray of light.

A Ray of Light: L40S Chips

Huang announced the release of a new GPU, L40S, designed to bypass some manufacturing bottleneck issues. These chips are tailored for fine-tuning existing AI models, making them a potential boon for smaller AI startups. Availability is expected this fall, offering a glimmer of hope amid supply challenges.

Huang's Non-Answer and the Inference Question

The shift from training AI models to inference (using models to power AI products) is a critical transition that may expose Nvidia to new competitors. Huang's response to a question on this topic was evasive, though the recent release of Grace Hopper 200 suggests Nvidia is attempting to address the issue. The question remains: Can Nvidia move fast enough to fend off competitors like Amazon Web Services?

Nvidia and the Cloud: DGX Cloud

Nvidia's DGX Cloud service is a growing part of the business, contributing "hundreds of millions of dollars" annually. While this is small potatoes compared to Nvidia's total revenue, the company is clearly prioritizing this service. Partnerships with Oracle, Microsoft Azure, and Google Cloud are in place, but the absence of AWS raises questions.

Generative AI Boom: Sustainable or Hype?

Perhaps the most intriguing question of the call came from a Goldman Sachs analyst: Will large-language models live up to the hype? Huang's optimism about a generational "platform shift" driven by generative AI was characteristic, but it's worth approaching cautiously.

Five years ago, Huang was a vocal proponent of self-driving cars, a technology that has yet to materialize fully. His distance from the front lines of AI startups and the gap between expectations and current economic value in generative AI warrants a grain of salt.

WTF?

Nvidia's earnings are a cause for celebration, but the company's future is filled with questions and challenges. From supply bottlenecks to the sustainability of the generative AI boom, Nvidia's path forward is complex.

The company's leadership in the GPU market is undisputed, but the landscape is shifting. The emergence of new competitors, the evolution of AI technology, and the intricate dynamics of supply and demand will continue to shape Nvidia's journey.

Ultimately, Nvidia's recent success is a testament to its innovation and strategic positioning. But as the company takes its victory laps, it must also navigate a future filled with uncertainty and opportunity. The story of Nvidia is far from over, and the following chapters will be fascinating to watch unfold.