Chipmaker Nvidia (NVDA) grabbed the artificial intelligence spotlight this week with a raised outlook that sent Wall Street analysts into a tizzy. For investors homing in on AI stocks, the valuation of NVDA stock moves to the forefront over fears of an AI bubble.
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In other developments, Google-parent Alphabet (GOOGL) said it’s in talks with European regulators over a voluntary pact to create AI guardrails. Also, at the Google Marketing Live event, the internet search giant unveiled more of its advertising strategy amid the rise of Open AI’s ChatGPT.
Meanwhile, cybersecurity firm Palo Alto Networks (PANW) reported fiscal third-quarter earnings that topped estimates. Management discussed its view of how generative AI will change cybersecurity. Here’s a link to the PANW earnings call transcript.
Since AI models require big data for training software algorithms, Palo Alto may be well-positioned with its cloud platform.
How Long Will Nvidia Dominate AI Chips?
But it was Nvidia that stood out among AI stocks with its raised outlook. Nvidia forecast July-quarter revenue of $11 billion, nearly $4 billion ahead of analyst estimates, driven by strong generative AI demand in its data-center business.
There’s more. Microsoft, the biggest investor in OpenAI, is developing closer ties with Nvidia. Also, the two companies are building a new AI supercomputer.
NVDA stock analysts said Amazon Web Services, the cloud-computing arm of Amazon.com (AMZN), appears to be a customer for new Nvidia AI chips. AWS has been a big buyer of Intel (INTC) chips.
Nvidia’s raised outlook raised questions on what Intel and Advanced Micro Devices (AMD) can do to capitalize on the boom in demand for AI chips in data centers.
Who Might Challenge Nvidia Among AI Stocks?
In the long run, Nvidia may face more stiff competition. Chip buyers almost always want a second source for semiconductors. They do not want to rely on one chipmaker and give that company more pricing leverage. Also, customers want diversity in case of supply-chain issues. For example, Microsoft also recently signed an AI development deal with AMD.
Meanwhile, the cloud-computing giants as well as Facebook-parent Meta Platforms (META) are all developing in-house, custom AI chips for hyperscale data centers. In April, Google announced a new AI supercomputer using custom silicon that it said was faster than Nvidia systems.
At Goldman Sachs, analyst Toshiya Hari says Nvidia for now is king of the hill in AI chips. It’ll take time for AI startups to scale up.
“While we recognize the emergence of competition from the large CSPs (cloud service providers) as well as other compute semiconductor suppliers, we envision Nvidia maintaining its status as the industry standard for the foreseeable future given its competitive moat and the urgency with which customers are developing/deploying increasingly complex AI models,” he said in a note to clients.
AI Stocks: Cybersecurity Battle
Elsewhere, software maker C3.ai (AI) reports earnings on May 31. With shares up 152% in 2023, it’s part of the buzz in AI stocks.
What’s also clear is that a big battle is on the horizon between hackers and cybersecurity firms.
Cybersecurity firm CrowdStrike Holdings (CRWD) reports earnings on May 31. It’s also among AI stocks to watch.
In other AI news, startup Anthropic on May 23 announced it has raised $450 million in a funding round led by Spark Capital. Google, Salesforce (CRM), Sound Ventures and Zoom Video Communications (ZM) took part in the funding.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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