Nvidia has just announced its first quarter results and saw profits jump from just over $2 billion USD to almost $15 billion USD.
👉 Background: Nvidia was founded back in 1993 but 10 years ago, it began to dabble in AI chips. With the rapid growth of AI, Nvidia has become one of the most talked about tech companies in the world.
👉 What happened: Nvidia has just announced its first quarter results, which smashed expectations. They saw profits jump from just over $2 billion USD to almost $15 billion USD... just a casual 628% increase.
👉 What else: While Nvidia is still catching up to the chip demand from big tech companies, it needs ensure it doesn't overshoot the demand and suffer from the ‘bullwhip effect’.
💡The bullwhip effect is when the supply of a product is so short that customers on the waitlist over-order the product. It's a bit like when you're starving at a restaurant and order everything on the menu.
💡But once AI chip supply and demand are more in balance, buyers may realised that they ordered more chips than they need. And then they pull back on new orders just as Nvidia begins producing even more AI chips.
💡We've seen this happen in the electric vehicle industry. While EV sales grew by 60% in 2022, sales are projected to grow by 21%. This has led to companies like Tesla cutting back on production and dropping their prices.
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