Generative AI Boosts Chip Growth as NVIDIA Achieves Record Revenue
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NVIDIA announced record revenue of $18.12 billion in its Q3 2024 financial report, with its data center business dominating, covering GPU sales and GPU/CPU systems for generative AI workloads. This business segment reached $10.32 billion last quarter, a 41% increase from $4.28 billion in the same period last year.
Jensen Huang stated that generative AI represents the largest total addressable market expansion for software and hardware markets in decades. He noted that large language model startups, consumer internet companies, and global cloud service providers are the first adopters, while regional cloud service providers are investing in building AI clouds. Enterprise software companies are integrating AI assistants into their platforms, and businesses are creating custom AI solutions to automate processes in the world's largest industries.
Among these, Sovereign AI has emerged as a new market, where governments establish their own AI computing infrastructure. NVIDIA has already generated revenue from this category of clients and predicts that nearly every major region and country will have its own AI cloud. Enterprise software companies also represent a significant growth area, with firms like SAP, ServiceNow, Adobe, Dropbox, and Getty integrating AI assistants and large language model-based knowledge management systems. Some of these companies collaborate directly with NVIDIA through its DGX Cloud service provided by AI Factory, while others utilize NVIDIA hardware hosted by their preferred cloud providers.
In the future, cloud service providers and AI startups will continue to drive the majority of NVIDIA's revenue, with Q4 FY2024 revenue expected to rise to $20 billion, despite an anticipated decline in the gaming sector. Data center sales, particularly in GPUs, networking, and software, will offset this decline. Additionally, enterprise clients building their own AI models are highlighted as another growth area, with some leveraging preferred cloud providers and NVIDIA's AI Factory services to support this market. Overall, NVIDIA's growth aligns with two key trends: the shift from general-purpose computing to accelerated computing and the rise of generative AI. Industry capacity is expected to expand continuously as demand increases.
Notably, major cloud service providers continue to restrict access to NVIDIA GPUs, requiring approval from sales managers and minimum spending commitments within defined usage windows. NVIDIA's AI workload-optimized Grace Hopper chips are expected to become its first multi-billion dollar product. NVIDIA's enterprise software sales, most of which are for AI solutions, are projected to reach an annual revenue level of $1 billion by the end of this fiscal year. Collectively, NVIDIA has become the central node of the entire generative AI industry, providing tools for gold miners and ensuring massive success regardless of which company succeeds.