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NvidiaPowering Intel’s historic rise is its data center business, which grew a staggering 427% in the most recent quarter as companies ramped up development of the company’s artificial intelligence processors.
Now Nvidia is signaling to investors that its customers, who are spending billions on its chips, will be able to make money on AI, too, a concern that’s unsettling for the company because customers have a finite amount of cash they can throw at infrastructure before it becomes profitable.
If Nvidia’s chips can deliver a strong and sustainable return on investment, the AI boom may have room to grow further as it moves past the early stages of development and companies plan longer-term projects.
The most important customers for Nvidia’s graphics processing units are the major cloud providers. Amazon Web services, Microsoft Azul, Google cloud and oracle Cloud. The company said cloud accounted for “mid 40%” of its $22.56 billion in data center revenue in the April quarter.
A new wave of GPU-focused data center startups is also emerging that buy Nvidia’s GPUs, install them in server racks, load them into data centers, connect them to the Internet, and rent them to customers by the hour.
For example, GPU cloud CoreWeave currently quotes $4.25 per hour to rent an Nvidia H100. This kind of server time is needed in large quantities to train large language models such as OpenAI’s GPT, and is how many AI developers ultimately get access to Nvidia hardware.
Following Nvidia’s better-than-expected earnings report on Wednesday, financial chief Colette Kress told investors that cloud providers see an “immediate and strong return on their investment.” She said that for every $1 a cloud provider spends on Nvidia hardware, it can rent it for $5 over the next four years.
Kress also cited the company’s HDX H200 product, which combines eight GPUs to provide faster access, and said newer NVIDIA hardware will provide an even higher return on investment. meta Use Llama AI models instead of direct access to cloud computers.
“This means that for every $1 spent on an NVIDIA HDX H200 server at current prices, API providers offering Llama 3 tokens can generate $7 in revenue over four years,” Kress said.
Part of the calculation includes how the chips are being used and whether they run 24 hours a day or less frequently.
Nvidia CEO Jensen Huang told analysts on an earnings call that for every GPU the cloud provider brings online, there’s OpenAI, Google, Anthropic and as many as 20,000 generative AI startups.
“All the work that’s being done now is [cloud service providers] “We’re consuming every GPU on the market,” Huang said. “There is tremendous pressure from our customers to deliver and launch systems as quickly as possible.”
Huang said that although Meta is not a cloud provider, it has expressed an intention to spend billions of dollars on 350,000 Nvidia chips. Facebook’s parent company Meta will need to monetize its investment, either through its advertising business or by incorporating chatbots within its current apps.
Meta’s servers are an example of “critical infrastructure for AI production,” or “what we call an AI factory,” Huang said.
Nvidia also surprised analysts with an aggressive timeline for its next-generation GPU called Blackwell, which will be available in data centers in the fourth quarter of the fiscal year. those comments softened Concerns about economic slowdown Businesses are waiting for the latest technology.
Initial customers for the new chip include Amazon, Google, Meta, Microsoft, OpenAI, Oracle, and more. teslaand Elon Musk’s xAI, Huang said.
Nvidia shares rose 6% in after-hours trading, surpassing $1,000 for the first time. In addition to the earnings release, Nvidia announced a 10-for-1 stock split after the company’s stock price rose 25-fold over the past five years.