Having benefited from a surge in demand caused by Big Tech's rush to chatbots, Nvidia now expects new AI models capable of creating videos and engaging in human-like voice interactions to stimulate more orders for its graphics processors. "There's a lot of information in life that needs to be video-based, physics-based. So that's the next big thing," reckons group CEO Jensen Huang. "You've got 3D video and you've got a whole bunch of things from which you learn. So these systems are going to be very large."

Increased computing power

The need for more computing power to train and run advanced AI systems has boosted demand for Nvidia's Grace Hopper* chips, such as the H200, which was first used in the first AI systems in the world.s GPT-4o - a multimodal model capable of realistic voice conversation with the ability to interact with text and image. Other Nvidia customers, including Google DeepMind and Meta Platforms, have also launched AI image or video generation platforms.

Explosive profits

The chipmaker forecast quarterly sales well ahead of estimates, following a more than fivefold increase in sales at its data center unit in the first quarter. "Demand is very broad, and large language models need to be increasingly multimodal and include not only video, but also text, speech, 2D and 3D images," explained Derren Nathan, head of equity analysis at Hargreaves Lansdown.


Nvidia sales by quarter (Zonebourse)

AI models for video used in the automotive industry are also emerging as an important driver of demand for Nvidia chips. Tesla has expanded its group of processors used in AI training to around 35,000 H100s as part of autonomous driving, said Colette Kress, Nvidia's chief financial officer, in a phone call after the release of results on Wednesday.

Ms. Kress added that the automotive industry is expected to be the largest vertical in Nvidia's data center business this year. "Video generation is certainly one of the strong and already proven use cases for AI, and it extends beyond just content production," Nathan added.

Nvidia shares are expected to be up 7% on Wall Street at the opening, on a new all-time high close to 1016 USD. On this basis, its capitalization would reach $2,500 billion, ranking third worldwide behind Microsoft ($3,200 billion) and Apple ($2,927 billion).

* The chip is named after an American computer scientist.