Nvidia's (NVDA) impressive revenue forecast has propelled the chip maker towards the trillion-dollar-value club, igniting excitement among investors.
With a growing demand for its products fueling the latest wave of artificial intelligence applications, Nvidia has become a top contender in the AI market. Surprisingly, the CEO of Nvidia himself hinted at potential winners in this booming industry, and two companies stand out from the crowd.
During the company's recent earnings report, Nvidia revealed results that exceeded expectations. However, it was the guidance for the current quarter that stole the spotlight. With a revenue forecast range of $11 billion at the midpoint, significantly surpassing the analyst consensus of $7.2 billion, Nvidia signaled its strong position in the AI market.
The driving force behind Nvidia's growth lies in the soaring demand for its data center products, which enable generative AI projects. The release of OpenAI's ChatGPT, an AI language model, has sparked a surge of interest in this form of AI. Nvidia's chips, as market leaders in this technology, play a pivotal role in enabling the creation of content through the ingestion of text, images, and videos.
Nvidia has witnessed a broad-based demand for AI from various sectors, including cloud computing providers, consumer internet companies, start-ups, and enterprises. It is evident that many businesses are embracing AI to stay competitive and avoid falling behind their rivals.
During the company's recent earnings report, Nvidia revealed results that exceeded expectations. However, it was the guidance for the current quarter that stole the spotlight. With a revenue forecast range of $11 billion at the midpoint, significantly surpassing the analyst consensus of $7.2 billion, Nvidia signaled its strong position in the AI market.
The driving force behind Nvidia's growth lies in the soaring demand for its data center products, which enable generative AI projects. The release of OpenAI's ChatGPT, an AI language model, has sparked a surge of interest in this form of AI. Nvidia's chips, as market leaders in this technology, play a pivotal role in enabling the creation of content through the ingestion of text, images, and videos.
Nvidia has witnessed a broad-based demand for AI from various sectors, including cloud computing providers, consumer internet companies, start-ups, and enterprises. It is evident that many businesses are embracing AI to stay competitive and avoid falling behind their rivals.
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Following the remarkable earnings report, Nvidia's stock soared 30% to reach $399.30 in the premarket, pushing its market value close to $980 billion. While this achievement is commendable, reaching further gains at this level becomes more challenging and involves higher risks. The market has priced in a significantly higher growth trajectory for Nvidia in the coming years, reflected in its elevated valuation compared to other industry players.It is important to note that not all new AI ventures will prove sustainable. Some applications and websites may not require chatbots, and not every generative AI start-up will find a viable business model. Given the substantial costs associated with generative AI, only projects that deliver value and attract paying customers will likely survive in the long run.
Nevertheless, there are still success stories waiting to unfold. Nvidia's CEO, Jensen Huang, hinted at two promising prospects during the earnings call: ServiceNow and Adobe. Huang expressed his excitement about Nvidia's partnerships with these companies as they leverage generative AI capabilities to cater to their corporate customers effectively.
ServiceNow (NOW), a leading enterprise software company, can utilize Nvidia's technology to develop custom large-language models that enhance functionality across the organization. By automating repetitive human resources requests and customer-service tasks using internal databases, ServiceNow's AI models can streamline processes and provide accurate answers to commonly asked questions. The enterprise focus of ServiceNow's AI models makes them more adaptable and efficient compared to general-use chatbots.
In terms of valuation, ServiceNow trades at about 12 times this year's sales estimate, while Adobe trades at 9 times sales, both lower than Nvidia's valuation.
Adobe (ADBE), a renowned software company, is integrating generative AI tools called Firefly into its content-creation software. This allows users to create and modify images based on text prompts, enabling faster design iterations and potentially reducing artwork costs. Moreover, Adobe's AI is trained on commercial images, making it an attractive choice for corporate customers who require copyrighted-free content.
Huang's endorsement of ServiceNow and Adobe as potential generative AI winners highlights their ability to provide groundbreaking features that customers are willing to pay for. These companies present an excellent opportunity to capitalize on the AI boom, with their respective platforms, customer bases, and favorable valuations.
As the AI revolution continues to reshape industries, investors seeking to ride the wave should keep a close eye on ServiceNow and Adobe. These companies have positioned themselves strategically to harness the power of generative AI and deliver innovative solutions that meet the evolving needs of businesses. By investing in the right stocks, individuals can potentially reap the rewards of this AI-driven era.
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