Nvidia Corp. proved Wednesday that it is experiencing a boom in revenue from generative artificial intelligence, but that doesn\u2019t mean the entire tech sector is about to follow suit.<\/p>\n
Nvidia\u2019s Calling that leap sudden would be an understatement: Profit more than doubled sequentially and jumped more than nine times from the same quarter last year, while revenue nearly doubled from the previous quarter and surpassed Intel Corp.\u2019s Full earnings coverage: Nvidia\u2019s stock soars after AI boom pushes chip giant to record results, blowout forecast<\/strong><\/p>\n There is no doubt that Nvidia\u2019s startling gains are from generative AI, the technology exemplified by OpenAI\u2019s ChatGPT that has created fervor in an industry hungry for a new focus other than a pandemic tech boom fizzling and ending more than a decade of strong growth. Where there is, or at least should be, doubt is in the breadth of the boom beyond the hardware Nvidia sells for generative AI.<\/p>\n \u201cAll the money right now is in the hardware,\u201d Maribel Lopez bluntly told MarketWatch on Wednesday.<\/p>\n Software companies are frantically trying to access Nvidia gear to develop their own next-generation versions that leverage generative AI, but there are no guarantees huge returns await them. Lopez, a tech industry analyst and founder of Lopez Research, noted that Microsoft Corp. \u201cI think everybody in the industry is waiting to see if [Microsoft] can layer economic dollars on top of adding gen-AI in their software stack,\u201d she said. \u201cRight now, nobody has proved they can do that yet. If nobody can do it in software, the only people who are making any money in the short term are hardware guys.\u201d<\/p>\n There will also be some money made by the large cloud providers, such as Microsoft, Alphabet Inc.\u2019s Don\u2019t miss: These AI-chip startups hope to challenge Nvidia<\/strong><\/p>\n And the fact that most of the companies developing gen-AI features for their software are using the same types of cloud services is another reason to doubt a widespread boom in fresh revenue across the tech sector. <\/p>\n \u201cEverybody has generative AI now, [but] there\u2019s a tremendous amount of time spent figuring out do you have anything that creates a barrier to entry to make your product successful over the others,\u201d said Lopez, who consults with tech companies on these issues. \u201cRight now, there aren\u2019t a lot of barriers to entry, because most people are using a large foundation model in the cloud, which everyone else has access to.\u201d <\/p>\n \u201cThis is a technology that will change every piece of software on the planet \u2026. but we haven\u2019t gotten to the other side yet, and that will take years,\u201d she added.<\/p>\n Even bullish Wall Street analysts seem to agree. While Goldman Sachs analysts have named 11 tech companies that they believe will benefit in the near term from generative AI \u2014 including some software makers, such as Salesforce Inc. For more: Nvidia may be the AI stock for now, but here are the picks for later, says Goldman Sachs<\/strong><\/p>\n \u201cThe timing of AI adoption is highly uncertain, but we expect AI adoption will likely Those analysts also detailed other issues beyond just the time it will take for software companies and others to develop products that matter to their top or bottom lines. There are huge concerns around regulation and fights over access to data \u2014 OpenAI is already facing class-action lawsuits regarding the data used to train its system, and many entities are trying to build as many walls as they can to keep companies from using their data moving forward. <\/p>\n Everything adds up to a very limited opportunity in the short term, largely centered on Nvidia and other hardware players, and uncertainty in the long term for those without their own data streams or products with a true \u201cmoat.\u201d<\/p>\n \u201cI do think we\u2019re a little gaga on generative AI, and I think in some cases that\u2019s going to be a big nothing for a lot of people,\u201d Lopez said. \u201cTo me, in order to have an AI opportunity in general, you have to be one of two things: You either have to be the people who are creating the hardware, the tools that make that AI happen, or you have to be the people that have the data.\u201d<\/p>\n Nvidia deserves the attention it is receiving for recognizing such huge returns after betting big on AI more than a decade ago, and the chip maker\u2019s long-term success does not require generative AI to live up to the hype. In an interview Wednesday afternoon, Nvidia Chief Financial Officer Colette Kress told MarketWatch that \u201cgenerative AI was the \u2018a-ha moment\u2019 for enterprises to understand how AI works and how they can apply it,\u201d but Nvidia will not live or die by its successful implementation.<\/p>\n \u201cIs that all that we\u2019re doing? Absolutely not,\u201d she said, mentioning AI\u2019s ability to discover new drugs and address important health issues, as well as to power some of the world\u2019s most powerful supercomputers.<\/p>\n Nvidia\u2019s AI capabilities are why it is suddenly a trillion-dollar company and headed higher. But be wary of jumping on any other tech stock in the belief that Nvidia\u2019s success will transfer easily elsewhere.<\/p>\n<\/p><\/div>\n
\n NVDA,
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\n results were truly amazing, as the company brought in as much revenue in a quarter as it used to haul in annually as recently as 2020. Nvidia also showed off more profit than the company collected all of last fiscal year. <\/p>\n
\n INTC,
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\n quarterly sales for the first time. And the blowout forecast calls for more big gains in the current period.<\/p>\n
\n MSFT,
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\n is attempting to charge $30 a user for its co-pilot software using OpenAI\u2019s technology, but she said its \u201cunclear as to whether that dog hunts right now.\u201d<\/p>\n
\n GOOGL,
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\n GOOG,
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\n Google and Amazon.com Inc.\u2019s
\n AMZN,
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\n AWS, which will be selling cloud access to the technology needed for generative AI. But those are also some of the biggest buyers of Nvidia\u2019s in-demand equipment, which could mean they are pushing money out the door faster than they bring it in, a dynamic Microsoft in particular has warned about. <\/p>\n
\n CRM,
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\n and Adobe Inc.
\n ADBE,
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\n \u2014 they admit that most gains are way down the road.<\/p>\n
begin to have a meaningful macro impact some time between 2025 and 2030,\u201d they wrote in a note earlier this week.<\/p>\n