Overseas technology industry has two major focuses: "the monopolistic NVIDIA" and "the opening of the IPO window" for Arm.

Wallstreetcn
2023.08.26 04:02
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At least for the foreseeable future, the majority of profits related to AI hardware may continue to be concentrated in NVIDIA; ARM's valuation could reach as high as $64 billion, making it potentially the third largest technology company IPO in history.

This week, the overseas tech industry has witnessed two major news events - Nvidia's explosive earnings report and SoftBank's chip company Arm's IPO application.

The reason why these news events are significant is because Nvidia's impressive performance has cleared obstacles for AI players downstream, while Arm has the potential to open the "window" to the long-awaited IPO market. This could greatly influence the trend of tech stocks in the coming year.

In the new era of computing, AI stands on Nvidia's shoulders

Nvidia's second-quarter performance is a milestone for both the company itself and the AI industry.

According to the earnings report released on Wednesday, Nvidia's second-quarter revenue doubled to $13.5 billion compared to the same period last year, which is almost unprecedented among all major chip manufacturers.

Its data center business is even stronger, with second-quarter revenue reaching a record-breaking $10.32 billion, more than doubling in just one quarter, driven by the booming demand for artificial intelligence.

Nvidia CEO Jensen Huang stated in the company's earnings report:

A new era of computing has begun. Companies around the world are transitioning from general-purpose computing to accelerated computing and AI. The competition in AI and accelerated computing is underway.

Huang previously stated that the $1 trillion global data center infrastructure will shift from traditional central processing units (CPUs) to graphics processing units (GPUs), which can better provide the power needed for parallel computing required by AI and other new applications.

This is good news for Nvidia.

As the "giant behind AI," Nvidia's GPUs are more favored by customers compared to competitors because their performance combines perfectly with Nvidia's powerful software programming platform ecosystem, CUDA. For over a decade, AI companies have been building and sharing AI-related tools and software libraries on CUDA, making it easier and faster to develop current AI applications.

This is what we call a sticky advantage. Therefore, when investors claim that Arm will become the next Nvidia, reality will harshly prove them wrong.

At least for the foreseeable future, most of the profits related to AI hardware may continue to concentrate on Nvidia rather than other companies.

The earnings report shows that Nvidia's second-quarter non-GAAP net profit increased by 422% year-on-year, reaching an incredible $6.74 billion, surpassing any other company in the AI race.

During the second-quarter earnings conference call, Huang stated that Nvidia's future order prospects are broad. Large internet companies, enterprises, and startups prioritize AI projects, so the transition to GPU architecture may continue for several years.

However, NVIDIA's dominance is a pain for its peers, especially traditional server hardware and chip manufacturers. The latest survey of chief information officers shows that while technology buyers are increasing their investments in AI, they are not expanding their overall budgets, but rather "robbing Peter to pay Paul."

Arm - the third largest tech company IPO in history?

In addition to NVIDIA's earnings report, the tech industry welcomed the second major positive news this week - the IPO market may reopen in the near future after two years of sluggish activity.

On Monday, Arm submitted its prospectus to the U.S. Securities and Exchange Commission (SEC) and plans to conduct its initial public offering (IPO) on the Nasdaq Stock Market with the ticker symbol "ARM."

However, the IPO market remains sluggish. According to Renaissance Capital, 68 IPOs have raised $9.9 billion so far this year, compared to 281 companies raising $96.3 billion during the same period in 2021. Over the past decade, an average of 129 IPOs have raised $33 billion during the same period.

That's why Arm's listing could be a make-or-break moment for the IPO market.

Wall Street CN previously mentioned that Arm's IPO could potentially become the largest U.S. IPO since Tesla's $13.7 billion fundraising in October 2021, and the third largest tech IPO after Alibaba's listing in 2014 and Facebook's listing in 2012.

Earlier this month, there were reports that Arm plans to start its roadshow in the first week of September and finalize the IPO's pricing in the second week. Arm is valued between $60 billion and $70 billion. Last week, it was reported that SoftBank recently acquired a 25% stake in Arm from the Vision Fund, valuing Arm slightly above $64 billion.