Q+A: Nvidia, SpaceX and OpenAI: is this the next great tech boom?
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What recent events are impacting Wall Street?
Welcome to Fear and Greed Q&A, where we ask and answer questions about business, investing, economics, politics, and more. I'm Sean Aylmer. It's been a remarkable 36 hours on Wall Street. First, chipmaker Nvidia reported quarterly revenue up 85% to $81.6 billion. That's for a quarter. Earnings up 211%, beating expectations. Then Elon Musk's SpaceX released the prospectus for its upcoming Wall Street IPO. Then there were reports that OpenAI, maker of ChatGPT, is racing towards its own listing with the help of Goldman Sachs. Plenty for investors to get their head around. Remember, this is general information only and you should always seek advice tailored to your circumstances before making investment decisions.
Josh Gilbert is Head Analyst, APAC and Middle East at eToro and a regular guest on the podcast. Josh, welcome back to Fear and Greed Q&A. Thanks for having me back, Sean. You're tired?
That's a pretty big 36 hours in your world. Yeah, it's always bitty.
How did Nvidia's earnings report affect investor sentiment?
I mean, you know, the biggest company in the world reports. Everyone wants to hear about it. And thankfully, people want to talk to me about it. So it's always good to talk about it. And I like talking about NVIDIA. It's a great company. I love Jensen Huang. So it's always fun to talk about.
Okay, let's jump into it. What do you think of the result, at least looking backwards? And then I'm going to ask you about looking forwards. What are the prospects for it?
What are the implications of SpaceX's upcoming IPO?
Yeah, I mean, firstly, another blockbuster quarter, right? A beat across the board, guided above, I think, really what analysts were expecting looking forward as well. The biggest thing was that the share price barely moved, really, after the result. I think that tells us everything about how high NVIDIA has set the bar itself, but also how high this bar is set in the broader AI trade. I think if we think about a company of this size, right, $5 trillion, right? to still be delivering 85% revenue growth and the share price barely budge is pretty staggering.
Is OpenAI on the verge of going public?
And I think that comes down to the fact that the market has just grown accustomed to perfection from NVIDIA. And although we got that, I think much of it was already priced in. So yeah, the bar was very, very high. And although I think we got there, I think the market is really looking for something almost outlandish to really move the share price.
The critics of NVIDIA say there are more competitors out there now. Some of the hyperscalers themselves may not need as many chips as they thought. Some of the tech platforms are actually thinking about developing their own chips. While NVIDIA remains at the top of the tree, how risky, I mean, what are the risks or how real are those risks that I just talked about for NVIDIA?
Look, the competition, you're absolutely right, is increasing. We had Amazon, when reporting earnings, told us about its new chip business coming through. Google, obviously, with its own chip. So yes, we're seeing the broadening of this AI trade. I think the biggest thing for us, though, is in the call, Jensen Huang said that NVIDIA will be supply constrained across the entire lifecycle of its new chip, which is the Rubin, which is expected in the second half. So that's a demand signal if you ever need one, that it ultimately doesn't have the supply to keep up with demand. So yes, although we are seeing competition increase, it's because there is so much demand. So Amazon maybe can't get exactly what they want, so they're having to build it themselves.
That does maybe create a long-term conversation around can those businesses do it themselves? But right now, NVIDIA is just the best in the business, and those hyperscalers are continuing to spend... hundreds of billions and will probably be in the trillions next year. And that is, you know, a lot of that flowing into GPUs and CPUs, which is where NVIDIA dominates and with CPUs is looking to dominate as well. So certainly competition is rising, but for the time being, I think that just matches the demand we're seeing. So it's not a problem for now.
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