How Nvidia and its Competitors Navigate the Rising Demand for AI

Summary: Nvidia has investors excited for its upcoming earnings report. People are also looking for other companies making money from artificial intelligence (AI). Synopsys, a lesser-known chip company, says AI makes up 10% of its sales now and will grow in the future. As more things become "smart" and AI develops, the demand for advanced computer chips increases. Currently, most of the demand for chips is driven by the Internet of Things (IoT) and smartphones, not AI. However, big companies like Applied Materials see an opportunity for growth in AI demand. Some investors are getting impatient and want quick profits from AI, so they are choosing to invest in Nvidia. There is currently a lot of demand for AI technology, but there isn’t enough supply to meet it.

Nvdia using AI technology

Earnings of Nvidia, the eminent chip manufacturer, are in hot discussion as anticipation builds amongst the investment community.

As the closing of trading nears, investment analysts are hurriedly revising their forecasts upward.

However, the central question gaining momentum is whether Nvidia can match the heightened expectations surrounding artificial intelligence (AI).

Investment enthusiasts are now eagerly scouting for other potential organizations capitalizing on the growing demand for AI.

Nevertheless, the present landscape reveals no contender coming close to Nvidia’s profit scale.

Firms operating in AI and chip manufacturing domains are witnessing an uptick in AI-related profits, heralding optimistic prospects.

Among the emerging entities tossing their hat into the AI ring is Synopsys (SNPS), a relatively lesser-known chipmaker.

Peers use Synopsys’ software to validate the design and functionality of their products. The newly appointed CEO, Sassine Ghazi, disclosed in an interview with Yahoo Finance Live that sales from AI already represent about 10% and are in the early stages.

According to Ghazi, the demand for chips is pivoting on dual trends — ‘smart’ everything (be it fridges, cars, or watches) and the swelling tide of AI.

Unprecedented Demand for Sophisticated Chips

“To make AI a reality, sophisticated chips are integral — both in cloud environments or data centers and at the edge,” Ghazi explains.

The incoming CEO, preparing to replace founder Aart de Geus on January 1st, adds, “With these dynamics at play, the demand for semiconductors is at an unprecedented level.”

Last week, Synopsys announced a 19% YoY third-quarter revenue hike to $1.49 billion and predicted a higher Q4 earnings than analysts were speculating. Additionally, it sealed a lucrative contract with Intel to build an intellectual property base for Intel’s nascent manufacturing units, a venture that will increasingly hinge on AI.

In addressing the sector’s talent crisis, Ghazi shed light on Synopsys’s vital role in automating and modernizing chip design.

“With AI, we can streamline chip design, reducing many tasks down to fewer tasks handled by fewer engineers and in a much shorter span.”

The Current State of AI in the Chip Industry

Yet, the lion’s share of chip demand is still fuelled by the growth of the Internet of Things (IoT), smartphones, and other non-AI processes.

In the same vein, Applied Materials (AMAT), the largest chip manufacturing equipment provider, sees the prominent role of AI in its future.

The company reported last week that AI equipment sales now make up 5% of its total sales, compared to 20% for data centers and 10% to 15% for IoT.

CFO Brice Hill projected a growth rate between 30% and 50% for AI demand, affirming its rapid development and future significance.

However, this futuristic view isn’t shared by all. Investors desiring immediate financial gains from AI are growing restless.

Suggestive of this sentiment is Matthew Bryson, SVP of hardware equity research at Wedbush covering the semiconductors sector, who moots Nvidia as the preferable option.

In his view, an investor’s best bet is to purchase Nvidia shares, as it is less pivotal what Nvidia reports as numbers. Bryson argues that assessing the discourse around AI demand is much more beneficial.

He adds, “There is severe demand out there currently. It isn’t being met and takes over 40 weeks to get it from Nvidia. The supply is simply insufficient.”

Our Vision

AI is often seen as a threat to human presence, but it’s crucial to remember that it’s merely a tool. Like electricity, its potential depends on how we utilize it. At Upbeator, we aim to empower you with knowledge about AI tools, enabling you to harness their wonders instead of fearing them.