Chipmaker giant Nvidia is generating vast sums from the sale of its advanced semiconductors, but the company has been fired a warning on the need for profit to provide stable foundations for the future.
As reported by The Korea Times, SK Group CEO and chairman of the Korea Chamber of Commerce and Industry (KCCI), Chey Tae-Won sounded a reminder of the precarious nature of supply and demand, required to underpin any successful business.
“Without making money, the AI boom could vanish, just as the gold rush disappeared,” said Chey, as he harked back to the California gold rush period in the mid-19th century. When the gold became scarce, the pickaxe sellers no longer had a market.
Nvidia is currently soaring from the insatiable demand for its AI-focused chips from companies such as OpenAI, Microsoft, Meta, and Google-owner, Alphabet. It was recently named the world’s most valuable company before some market adjustments but it currently boasts a market cap of $2.9 trillion.
Factors which could affect Nvidia’s profits
Chey advised caution on the AI sector and the need to nurture profit, as much as there is no immediate prospect of demand for the chips to diminish. That is offset by the vast costs Nvidia and other companies need to absorb to provide their products, as highlighted by Venture capital firm Sequoia Capital. It was recently estimated that the tech industry needs to rake in $600 billion annually to break even on AI investment.
There is also the rise of Amazon, Microsoft, Google, and Meta – all are taking further steps to develop their own chips.
If these endeavors progress to a significant level of performance to disrupt their reliance on external providers, there will be an immediate consequence for Nvidia. There is also the presence of existing competitors such as AMD which could narrow the gap.
Image credit: Via Ideogram
The post “Nvidia sent profit warning amid uncertainty of AI boom” by Graeme Hanna was published on 07/23/2024 by readwrite.com