Nvidia, the world’s most valuable chipmaker enters the CPU market

Intel might have some trouble processing Nvidia’s latest news… On Apr. 12, Nvidia, the world’s most valuable chipmaker, came out with 2 big announcements:

• Plans to build its own data center central processing unit chips (CPUs – i.e. brain inside your computers) that would operate 10x faster than other chips – a move that would eat into Intel’s business
• Expects first-quarter earnings (to be released in May) to top projections.

The news sent Nvidia’s stock soaring 6% and competitors, Intel and AMD down more than 5%.

Dethroning the king

In 2020, Nvidia overtook Intel, which once dominated the CPU industry, as the largest chipmaker in the world (by market cap). While Nvidia is historically known for its graphics cards, moving into the market for CPUs allows Nvidia to:

• Develop a new revenue stream – the semiconductor market as a whole is expected to grow over 8% to $469.4b in 2021.
• Chip away at the CPU market – where Intel controlled 60.9% and AMD controlled 38.9% of the market.

This puts further pressure on Intel, who’s already struggling to maintain its relevance after nearly 40 years at the top (can Intel return to its glory days?)

How to hype up your investors and scare your competitors?

By making announcements like these – a month before releasing earnings results in May – Nvidia:

• Expects each of its business units to outperform previous projections.
• Raised its expected sales for its cryptocurrency mining processors from $50m to $150m.

Over the past decade, Nvidia’s CEO, Jensen Huang, made big, successful bets on some of the fastest-growing industries: gaming, crypto, data centers, etc. — sending its stock up over 28x in the past 6 years.

In 2020, Huang made his next move – acquiring ARM for $40b (deal is still being reviewed). If the ARM acquisition is approved by regulators, the deal could turn Nvidia even more into a powerhouse.

For investors… When they all want you to fail

The ARM deal would give Nvidia so much power and control over the industry that many of Nvidia’s competitors and ARM’s suppliers are objecting to the deal. The list of firms that are objecting to the deal runs long: Huawei, Microsoft, Google, Qualcomm, etc.

While the deal is going through a long review process by regulators, industry tech investors are already anticipating the deal to be rejected.

But deal or no deal, Nvidia is expecting some big numbers in its May earnings report that could send Intel another reminder of who’s on top.