US President: Fed should lower interest rates after Nvidia's success

Artificial intelligence (AI) giant Nvidia has become the first company in history to end a trading session with a market capitalization of $4 trillion.

Nvidia crossed this milestone in the trading session on July 9, although it retreated slightly and closed below the record high, but made a spectacular comeback on July 10.

On this occasion, US President Donald Trump posted on the social network Truth Social to give a positive review of Nvidia, while once again criticizing US Federal Reserve (Fed) Chairman Jerome Powell.

He sees Nvidia's success, along with the broader market rally, as evidence that Mr. Powell should cut interest rates.

Nvidia has had a banner year, with its stock price up 21% year-to-date.

The rally comes despite the company facing major headwinds in January 2025, due to concerns that Chinese AI company DeepSeek could eliminate the need for AI businesses to buy expensive chips to train their models.

DeepSeek announced that it had successfully trained its R-1 AI model on Nvidia chips that were not the most advanced, reversing the notion that the best way to train powerful AI is to use powerful chips. The news sent Nvidia shares plunging, wiping out $600 billion in market capitalization.

At the same time, concerns are also emerging that AI companies are moving from training AI models to inference, that is, deploying them in real-world applications, and thus potentially using less powerful and cheaper chips.

However, so far, both of those hypotheses have been proven wrong.

Nvidia's chips remain among the best choices for training AI models, and the industry has shown that inference also benefits from more powerful AI processors, as they allow software to answer complex questions more quickly.

While Nvidia continues to benefit from hyperscale cloud providers like Amazon, Google, and Microsoft, which account for nearly 50% of its revenue, Nvidia is also pushing into sovereign AI, which is AI data centers that allow countries to use their own AI services instead of relying on foreign ones.

Nvidia is expected to supply hundreds of thousands of chips to countries including Saudi Arabia and European countries.

Additionally, Nvidia has successfully managed to bypass embargoes on chip sales to China from both the former President Joe Biden administration and the Trump administration.

Although Nvidia's profits in the most recent quarter plummeted by $4.5 billion due to the ban and are expected to record a larger decline of about $8 billion in the current quarter, the company's stock price continues to soar.

Nvidia Corp. has become the world’s most valuable chipmaker thanks to its dominance in AI computing. Nvidia’s revenue continues to soar and orders for its AI accelerator chips continue to fill up. Nvidia’s continued success depends on CEO Jensen Huang’s ability to steer the ship through the storm.

Nvidia, founded in 1993, pioneered this market with investments more than a decade ago, betting that parallel processing would give its chips value beyond gaming.

The Blackwell chip line is advertised as delivering 2.5 times the AI training performance of the Hopper chip.

This new design is so complex that it cannot be manufactured as a single conventional chip, but is essentially two chips tightly connected to function as one.

Nvidia was already the king of graphics chips. Nvidia engineers realized in the early 2000s that they could adapt these graphics accelerators for other applications.

At the same time, AI researchers discovered that their work could be made more practical using this type of chip.

Nvidia now controls about 90 percent of the data center GPU market, according to market research firm IDC. Nvidia has achieved this dominance by constantly updating its products, including the software that powers its hardware, at a pace no other company can match.

However, Nvidia also faces some challenges. Major cloud service providers and Nvidia customers such as AWS (Amazon), Google Cloud (Alphabet) and Azure (Microsoft) are developing their own chips.

Traditional competitors like AMD and Intel are not out of the game either.

AMD, Nvidia's strongest rival in graphics chips, expects AI accelerator chip sales to be flat in the first half of the year, while Nvidia chip sales are still growing more than 50% each quarter./.

(Vietnam+)

Source: https://www.vietnamplus.vn/tong-thong-my-fed-nen-ha-lai-suat-sau-thanh-cong-cua-nvidia-post1049117.vnp