NVIDIA - these six letters stand for a superlative champion on the stock market. Due to the insatiable demand for its high-end processors, the chip manufacturer with the cryptic name became the most valuable company in the world in June of this year, overtaking the "old hands" Microsoft and Apple. The climb was exponential: it only took nine months for capitalization to jump from USD 1 trillion to USD 2 trillion in February 2024 and then just another four months to reach the USD 3 trillion mark. At these heights, however, the air became thinner. What followed was a correction in which more than USD 500 billion in company value has since evaporated.
The tech group from Santa Clara is considered the AI profiteer par excellence. According to experts, NVIDIA controls around 80% of the global market for special processors for artificial intelligence. The new top model, the "Blackwell B200", is estimated to cost more than USD 20,000 per unit. Mass production of the high-end chip, which is said to be 30 times faster than its predecessor, will start in the coming months.
The fact that demand for NVIDIA's chip designs is enormous can be seen in its balance sheet quarter after quarter. In the first quarter of the 2024/25 financial year (January 31), sales jumped by a further 262% to USD 26.04 billion. Net profit increased by 462% to USD 15.2 billion. By comparison, three years ago the Californians only generated USD 5.7 billion in the three months from February to April and the surplus was a measly USD 1.9 billion compared to today (see chart)
While the AI boom is giving a strong boost to growth on the one hand, the headwinds are increasing on the other. Restrictions imposed by the US government on deliveries to China have caused revenue in China to fall from 27% to 17% of Group sales in the past financial year compared to two years ago. According to insiders, the company is working on a special version of its current AI chip for the Chinese market in order to circumvent the embargo. This processor, developed together with Chinese sales partner Inspur, will reportedly be launched on the market in the second quarter of 2025. The current top model for China is still the "H20", of which more than 1 million units are expected to be sold this year according to the research experts at SemiAnalysis. The sales volume for these processors is estimated at more than USD 12 billion.
The competition is not sleeping either and wants to take a bigger slice of the AI pie in the future. In order to take market share away from NVIDIA, young start-ups such as Cerebras are also stepping up the pace of development alongside long-established chip companies such as AMD and Intel. Cerebras is now also aiming to go public and has already submitted a confidential application to the US Securities and Exchange Commission (SEC). Not only could increasing competition make life more difficult for NVIDIA in the future, but various authorities have also set their sights on the company. For example, French antitrust watchdogs are investigating NVIDIA for alleged anti-competitive behavior. According to a media report, the US Department of Justice has also launched an investigation. The global market leader allegedly put pressure on cloud providers to buy several of its products.
The upcoming figures for the second financial period from May to July will show whether demand for NVIDIA's chips continues unabated. In the previous six quarters, analysts sales expectations were exceeded in each case. The Group will publish its interim report on August 28. By then at the latest, it will be clear whether the recent bottom at USD 100 was actually the low point of the consolidation and whether the share will pick up its pace again or whether the three-digit price range is once again in danger.
Barrier reverse convertibles do not require an upward turnaround to generate attractive profits. Due to the recent spike in volatility on the Nasdaq 100, the terms of BRCs on NVIDIA are currently particularly attractive. Leonteq is taking advantage of this development and is launching two new products. While both BRCs are equipped with risk buffers of a reassuring 45%, the coupons offer the prospect of double-digit percentage returns. The CHF-denominated product offers an attractive interest rate of 12.00% p.a., while the USD variant even offers an above-average potential return of 15.80% p.a. Watch out: Investors do not have to worry about early redemption with the two BRCs. As a callable function is not included in the structure, the term is exactly one year.
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