Making further strides in the AI-chips market
- Latest desktop GPUs allow users to harness potential of AI from their PCs
- Separately, Nvidia alleged to begin mass production for its designed-for-China AI chips in 2QCY24
- Potential incremental revenue from Gaming, backfilling lost revenue through China-focused AI-chips
Rollout of new AI-chips. First,the new desktop graphics chips unveiled under its GeForce RTX 40 SUPER Series allows users to harness the potential of AI from their own personal computers. For context, the Gaming segment used to be the mainstay for Nvidia, before being overshadowed by the Data center segment on the ongoing AI-boom; revenue contribution from Gaming fell from 34% in FY23 to c.18% in latest Q3FY24 results. Separately, it was reported that Nvidia is looking to begin mass production for its designed-for-China AI chips in 2QCY24.
Extension of Nvidia’s AI-leadership. We take Nvidia’s latest rollout of AI-related chips as a positive step in furthering its market leading position in the wider industry. While Data center segment remains as the main growth driver (c.83% of US$20.2bn in Q4FY24 consensus revenue estimates), some incremental pickup from the Gaming segment should be expected amid an improving PC market. Moreover, another positive stems from the potential of backfilling some of the lost revenue through the designed-for-China chips when it materializes in 2HCY24 – bearing in mind that China consistently contributed about 20-25% of Data Center revenue over the past few quarters. Maintain BUY with target price of US$608.40.