A recent estimate of NVIDIA's profits from the AI hype shocked us all, as it was disclosed that the company earns a whopping 1000% profit on its H100 AI GPUs.
NVIDIA's Plans to Generate $300 Billion By AI-driven Sales Seems Achievable Given The Vast Profits Being Made
Tae Kim, a senior writer from the media outlet Barron's, estimates that NVIDIA is reaping immense benefits from its vast AI sales, potentially breaking all records.
The source has credited the investment banking company, Raymond James, stating that the cost of H100 GPUs starts at $3,320, and the company sells those GPUs for $25K-30K. While we haven't obtained a BoM (Bill of Materials) for the AI GPUs, we certainly believe that this is a ballpark figure, and NVIDIA could potentially be making a lot more, which we will explain later.
Raymond James estimates it costs Nvidia $3,320 to make a H100, which is then sold to customers for $25,000 to $30,000.
— tae kim (@firstadopter) August 16, 2023
This statement from Tae Kim brings in many factors to consider, starting with the costs associated with manufacturing the actual GPUs. The process involves many steps, from acquiring "building blocks" to shipping and after-sales services. So you might say that the 1000% profit estimate isn't correct here, but I believe you have overlooked an important fact.
In previous reports, we have mentioned several times that the H100s are selling way beyond their actual pricing and, on some occasions, have reached around USD $70,000. The "profit margin" figure may not consider the inflation factor, meaning actual numbers could be much higher. We also went into the depths, figuring out the primary reasons behind the inflated prices in an extensive coverage, which you can view here.
NVIDIA is extracting profits in tremendous amounts, and the "crypto mining" inflation doesn't come near the AI hype. We have seen significant investments poured into the AI sector, one example being the aim of Team Green to ship 550,000 H100s in 2023. With the prediction of generating over $300 billion through AI sales by 2027, NVIDIA isn't stopping here. Once the next generation of AI GPUs is unveiled, we could witness explosive growth, with the company's market cap figures going out of the roof.
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