INTERNATIONAL UNIVERSITY-HCMC UNIVERSITY

Introduction to Macro Economics

LECTURER: DR. Nguyen Ba Trung

GROUP ASSIGNMENT

Group members

Members Student ID
Nguyễn Vũ Đức Cường FAFBIU22032

Phí Hoàng Minh Sang BABAIU22395

Nguyễn Văn Lộc BABAIU22390

Trần Hoàng Bảo BABAIU22388

 TABLE OF CONTENTS

I.Introduction.....................................................................................................................3
II. Business Operations.....................................................................................................3
1 Nvidia’s Production Processes & Breakthroughs................................................................3
2. Strategic Positioning in the Vertical Value Chain and Competitive Advantages............3
3. Output and Productivity.......................................................................................................4
4. Operation Strategy.................................................................................................................5
III. Two main factors affecting the demand and supply of Nvidia...............................5
1. Demand...................................................................................................................................5
2. Supply......................................................................................................................................6
IV. Macroeconomics & Business operation.................................................................................7
1.COVID-19 Lockdown.............................................................................................................7
1.1 Economic............................................................................................................................7
1.2 Nvidia’s Company..............................................................................................................8
2. Crypto.....................................................................................................................................9
2.1 The impact of the crypto market on the global economy...................................................9
2.2 The impact of the crypto market on the NVIDIA company.............................................12
V. Future strategy for Nvidia.........................................................................................13
1. Supply Chain Resilience......................................................................................................13
2. Continued Focus on AI and Machine Learning................................................................14
3. Diversify revenue streams and reduce reliance on cryptocurrency mining...................14
I.Introduction
This report serves as a comprehensive overview of NVIDIA Corporation, which, founded in 1993 by
Jensen Huang, Chris Malachowsky and Curtis Priem, is a pioneering force in the technology industry,
known for its innovation in graphics processing units (GPUs) and AI technologies. Headquartered in
Santa Clara, California, NVIDIA has become a global leader in visual computing, transforming
industries through its powerful hardware and software solutions.

II. Business Operation & Technology Industry

1. Nvidia’s Production Processes & Breakthroughs
NVIDIA operates a fabrication facility in Santa Clara, California, where it conducts limited
production, research, and development. The company follows a fabless manufacturing model,
outsourcing all stages of the production process—wafer fabrication, assembly, testing, and packaging
—to third-party suppliers.
Nvidia's production facilities are located globally, including in Taiwan, China, the US and other
countries. Nvidia selects these sites based on factors like market proximity, economic considerations,
access to cutting-edge technologies and supply chain efficiency.
In 2023, Nvidia reported annual revenue of $26.9 billion, with a gross margin of 67.1%. Its net income
was $9.8 billion.
Nvidia recently introduced cuLitho software, which helps speed up the design and manufacturing
process of next-generation semiconductor chips.
cuLitho runs on Nvidia GPUs and delivers a performance leap of up to 40x beyond current lithography
processes.
This breakthrough enables the creation of chips with smaller transistors and wires, while also reducing
power needs and environmental impact.
Nvidia is collaborating with semiconductor industry leaders like ASML, TSMC and Synopsys on the
development and deployment of cuLitho.
2. Strategic Positioning in the Vertical Value Chain and Competitive Advantages

NVIDIA's Platform Strategy:

NVIDIA uses a platform strategy that combines software, hardware and systems, algorithms,
libraries, and services.
The design allows support for integrating multiple software groups with the same underlying
technology to serve different customer needs.
By specializing in a single technology (GPUs) and then leveraging that as a launching pad,
NVIDIA has effectively snowballed its product range.

Focus on AI, Simulation and Collaboration:

NVIDIA's focus on AI, real-time simulation, and collaboration solutions (e.g., NVIDIA
Omniverse™) transforms product development workflows, optimizing design and efficiency.

 Competitive Advantages:
- Technology Leadership:

NVIDIA's breakthroughs in AI and GPU technology give them an edge in chip design and
manufacturing.
NVIDIA has the strongest chip engineering teams in the industry.
- Collaboration with Industry Leaders:
NVIDIA's partnerships with TSMC, ASML, and Synopsys enhance its capabilities and enable
advancements in lithography and chip production.
- Energy Efficiency:

NVIDIA's cuLitho technology's parallel processing reduces power consumption, benefiting both chip
production and data centers.
- Speed to Market:

NVIDIA's accelerated processes allow for faster chip development and deployment.
- Market Share and Competition:

NVIDIA's AI accelerators hold an 83% market share in the dedicated AI accelerator market segment.
NVIDIA dominates the AI chip market, but faces rising competition from other players.
3. Output and Productivity:

NVIDIA produces a vast array of products, including high-performance gaming GPUs, data center
solutions, complex visualization and cryptocurrency mining.
The specialized AI Tensor Cores found in NVIDIA GPUs provide state-of-the-art performance and
groundbreaking capabilities.
NVIDIA's FY 2024 financial results demonstrate its productivity:
- Revenue of $60.9 billion
- Gross profit of $44.3 billion

This showcases NVIDIA's capacity to scale and seize market opportunities.

Lithography Advancements:
- NVIDIA's adoption of Litho technology can help fabs (fabrication plants) produce more
photomasks daily while using less power.
- Longer-term benefits include better design rules, higher density, higher yields and AI-powered
lithography.
4. Operation Strategy:
- Platform Approach: NVIDIA integrates hardware, software, algorithms and services to
deliver comprehensive solutions to its customers.
- Market Focus: NVIDIA targets markets where its computer platforms can significantly
accelerate application performance, such as gaming, data centers, and visualization.
NVIDIA’s strategic approach capitalizes on its tech prowess in diverse areas, delivering top-tier,
unique solutions. Concentrating on markets where its platforms excel, NVIDIA secures a robust
market standing and ensures ongoing expansion.
To illustrate with some financial data:
 - NVIDIA recorded $60.9 billion in revenue and $44.3 billion in gross profit for its fiscal year
2024, illustrating the robust financial results made possible by its strategic operational
approach.
- The company's success has been largely attributed to NVIDIA's focus on innovation and
cutting-edge technology, which have allowed it to have a dominant position in the GPU and AI
markets.
- All things considered, NVIDIA's platform and market-focused operational strategy has been a
major contributor to its capacity to provide customers with unique value and maintain its solid
financial and operational success.

III. Two main factors affecting the demand and supply of

Nvidia.
1. Demand:
Gaming industry: The popularity of PC gaming directly influences the demand for Nvidia's
GPUs. Whenever new, visually demanding games are launched or there is a rise in esports viewership,
gamers look for high-performance GPUs to enrich their gaming experience.This increased demand is
reflected by a rightward shift in the demand curve.
2. Supply:
Global Semiconductor Shortage: The ongoing chip shortage heavily disrupts Nvidia's ability
to produce GPUs. Limited raw materials and manufacturing capacity lead to a leftward shift in the
supply curve.AD
Supply and Demand Diagram Analysis:
The original equilibrium point (E0) lies at the intersection of the initial supply (S0) and demand (D0)
curves.
Increased Gaming Demand: A rise in gaming enthusiasm pushes the demand curve to the right (D1).
This shift creates a shortage at the original equilibrium point (E0) as the quantity demanded (Q1)
exceeds the quantity supplied (Q0). The price point will tend to rise to a new equilibrium (E1) at a
higher price (P1) and a potentially slightly higher quantity (Q1').
Semiconductor Shortage: The chip shortage restricts Nvidia's production capacity, causing the supply
curve to shift leftward (S1). To reach a new equilibrium (E2), the price most likely increases (P2) with
a potentially slightly lower quantity (Q2').

Conclusion:
Fluctuations in gaming demand and global chip shortages significantly impact Nvidia's GPU market.
Through the lens of supply and demand helps predict possible price changes as well as the possib ility
of surpluses or shortages.

IV. Macroeconomics & Business operation

1. COVID-19 Lockdown
1.1 Economic

The COVID-19 pandemic had significant impacts on macroeconomic conditions, both in the short run
and the long run. These impacts can be analyzed using the aggregate demand and aggregate supply
model.

Short-Run Effects:

- Aggregate Demand Shock:

o Lockdowns and uncertainty led to a sharp decline in consumer spending, business

investment and international trade.
 o The aggregate demand curve (AD) shifted leftward due to reduced demand. (1)

- Aggregate Supply Shock:

o Disruptions in production processes, labor shortages and supply chain issues decreased
the economy’s productive capacity.

o The aggregate supply curve (AS) shifted leftward. (1)

(2) The combined effect of the leftward shifts in both aggregate demand and aggregate supply led to a
significant economic contraction, with a decrease in real GDP and potential GDP, as well as higher
unemployment and lower inflation rates at B

Long-Run Effects

- Fiscal and Monetary Policy Responses:

o Governments and central banks implemented various fiscal and monetary policy
measures to support the economy during the pandemic, such as stimulus packages,
quantitative easing, and interest rate cuts.

o These policies aimed to boost aggregate demand (shift right to C) and support economic
recovery, potentially shifting the aggregate demand curve back to the right in the long
run. (3)
- Structural Changes:
o The pandemic accelerated certain structural changes in the economy, such as the
adoption of remote work, e-commerce, and digitalization.
o These changes could potentially increase productivity and shift the long-run aggregate
supply curve to the right, mitigating some of the negative effects. (4)
The enduring macroeconomic effects of the COVID-19 pandemic will hinge on how these elements
interact and the success of policies in tackling structural shifts and bolstering economic growth to aid
in the economic recovery at A.

1.2 Nvidia’s company

The COVID-19 pandemic has had a significant short- and long-term impact on global supply chains,
including those of technology companies such as Nvidia, a leader in the graphics processing
computing industry (GPU) and artificial intelligence (AI).

Short-term impacts:

- Supply chain disruption: Nvidia faces supply chain challenges due to factory closures and
logistics disruptions caused by the pandemic. This leads to temporary shortages and delays in
GPU shipments.
- Demand for gaming GPUs is on the rise: With people staying at home due to the lockdown,
the demand for gaming GPUs has increased as many people turn to gaming for entertainment.
- Challenges in the data center business: Some businesses and organizations have delayed or
scaled back their data center investments due to economic uncertainties, which initially
impacted their businesses. Nvidia data center GPU sales.

Long-term impacts:

- Accelerated adoption of remote work and cloud computing: The pandemic accelerated the
shift towards remote work and cloud computing, which increased the demand for Nvidia's
GPUs in data centers and cloud infrastructure. This trend is expected to continue in the long
run.
 - Optimization Software: Nvidia’s cuOpt AI software optimizes route planning, warehouse
picking, fleet management and more, helping control delivery costs from factories to stores and
homes.
- Growth in AI and machine learning: The pandemic highlighted the importance of AI and
machine learning in various sectors, such as healthcare, research, and automation. As a leader
in AI computing, Nvidia is well-positioned to benefit from the increased adoption of these
technologies.
- Diversification into new markets: Nvidia has been actively diversifying into new markets,
such as autonomous vehicles, robotics, and healthcare. The pandemic may have accelerated
some of these efforts, as companies seek technological solutions to address challenges posed by
the pandemic.

- Investment in supply chain resilience: To mitigate future supply chain disruptions, Nvidia
and other tech companies are likely to invest in building more resilient and diversified supply
chains, which could impact their long-term strategies and operations.

Due to these obstacles, manufacturing and distribution have slowed down, which has led to inflation
and economic disruption. Despite early stumbles, Nvidia's long-term AI plan may strengthen the
supply chain. The pandemic has caused some early challenges, but Nvidia has noticed a spike in
demand for gaming GPUs, and things have mostly worked out well. The pandemic has accelerated
advancements in artificial intelligence, cloud computing, and gaming—all of which are fundamental
skills of Nvidia.

2. Crypto
2.1 The impact of the crypto market on the global economy

The global economy was significantly impacted by the crypto market decline in 2022. Reduced
investment, labor, and materials from the struggling crypto industry led to higher prices and lower
output. The decrease in household spending and business investment in the crypto sector further
worsened the economic situation. Policymakers adjusted the discount rate to encourage investment and
support long-run productive capacity, but its short-term effects were limited due to lingering supply
constraints from the crypto market downturn.
Impact on Aggregate Supply (AS):
Capital (K):
- Companies related to the crypto industry will be affected, having to cut back or postpone
investments.
- This reduces capital accumulation in the economy, causing a leftward shift of the LRAS curve.
Labor (L):
- Many companies in the crypto industry are forced to reduce their workforce.
- This decreases the labor supply, indirectly causing a leftward shift of the LRAS curve.
Technology (H):
 - The decline of the crypto market may impact research and development of new technologies in
this field.
- This slows down technological progress, leading to a leftward shift of the LRAS curve.
When the crypto market declines, companies related to this industry will be negatively affected, such
as NVIDIA.
In the short-term, the Short-run Aggregate Supply (SRAS) curve may also shift to the left as
companies are forced to adjust their production and supply chains.
The result is that the general price level in the economy increases, and total output decreases, reflecting
the negative impact on the economy's productive capacity.
Impact on Aggregate Demand (AD):
Consumption (C):
- Households may reduce their spending on crypto-related products and services.
- This decreases the consumption component of AD, leading to a leftward shift of the AD curve.
Investment (I):
- Businesses involved in the crypto industry may cut back on their investment plans.
- This reduces the investment component of AD, leading to a leftward shift of the AD curve.
Government Spending (G):
- Governments may adjust their policies and spending related to the crypto industry.
- This can affect the government spending component of AD, possibly leading to a shift of the
AD curve.
Net Exports (NX):
- The decline in the crypto market may impact the trade balance, as crypto-related exports and
imports are affected.
- This can change the net exports component of AD, potentially causing a shift of the AD curve.
- The decline in the crypto market may lead to a decrease in spending and investment by
investors and consumers.
- This causes the Aggregate Demand (AD) curve to shift to the left, reflecting a decline in
macroeconomic demand in the economy.

The Discount Rate Policy:

Impact on Long-Run AS (LRAS):
- A decrease in the discount rate can lead to lower borrowing costs for businesses.
- This can encourage investment in capital (K), technology (H), and materials (M) - key
components of LRAS.
 - Increased investment in these areas can expand the economy's productive capacity in the long
run, shifting the LRAS curve to the right.
Impact on Short-Run AS (SRAS):
- A decrease in the discount rate can also stimulate aggregate demand (AD) in the short run.
- Lower borrowing costs may encourage more consumption (C) and investment (I), leading to an
increase in AD.
- The increase in AD puts upward pressure on the price level, causing a movement along the
SRAS curve.
- However, the impact on SRAS may be limited in the short run, as the decline in the crypto
market can still constrain the supply of labor (L) and materials (M).
In summary, the discount rate policy can be used to address the effects of the crypto market decline on
the macro economy:
Lowering the discount rate can help mitigate the leftward shift of the LRAS curve by encouraging
investment in the long run.
The impact on the SRAS curve may be more limited in the short run, as other supply-side factors
influenced by the crypto market decline can still constrain the economy's productive capacity.

2.2 The impact of the crypto market on the NVIDIA company:

In 2022, the cryptocurrency market experienced a severe downturn, with Bitcoin declining by more
than 75% from its 2021 peak. Specifically, the price of Bitcoin dropped from a record high of around
$69,000 in November 2021 to around $16,500 by the end of 2022, the lowest level since 2020.
This sharp decline in Bitcoin prices had a significant negative impact on the business operations of
Nvidia, a leading provider of graphics chips and processors used for cryptocurrency mining and
transaction processing. As a major supplier of hardware for the crypto industry, Nvidia felt the effects
of the market contraction acutely.
The key impacts on Nvidia included:
- Substantial decline in revenue from crypto-specific products:
o Nvidia's "Cryptocurrency Mining Processors" (CMP) product line, designed
specifically for crypto mining, saw revenue plummet by over 90% from $246 million in
2021 to just $24 million in 2022, a staggering 92% year-over-year decline.
o This dramatic drop was due to the collapse in demand for mining hardware as
cryptocurrency prices crashed and mining activities dried up.
- Weakened demand in the gaming market:
o Revenue from Nvidia's gaming segment, which includes graphics cards used for both
gaming and cryptocurrency mining, declined by 51% year-over-year from $3.22 billion
in Q4 2021 to $1.58 billion in Q4 2022.
o As cryptocurrency mining activities waned, demand for Nvidia's high-end gaming
GPUs used for mining purposes also declined sharply.

- Overall financial performance miss:

o Nvidia’s total revenue in Q4 2022 declined by 33% to $6.05 billion, compared to $7.64
billion in the same period of the prior year, missing analyst expectations.
o The company's overall financial results were significantly impacted by the collapse in
cryptocurrency-related demand for its products.
NVIDIA faced supply chain challenges in adjusting production to the crypto downturn, leading to
inventory issues in the short-term. Long-term, they can optimize manufacturing and respond better to
market changes.
The demand slump for NVIDIA's crypto-related products significantly impacted revenue, but they can
pivot to other growth markets like gaming, AI, and machine learning to offset this in the long run.
The crypto market downturn underscores NVIDIA's need to diversify its business further to reduce
dependence on the volatile crypto industry.

V. Future strategy for Nvidia

Based on the analysis in part 4, Nvidia should focus on becoming a leader in AI computing by
capitalizing on long-term trends in cloud, AI, and emerging markets. At the same time, they must
invest in supply chain resilience to mitigate future shortages and diversify revenue sources to reduce
dependence on cryptocurrency mining
1. Supply Chain Resilience:

Rationale: Building supply chain resilience can help Nvidia mitigate the impact of future disruptions,
ensure a more stable flow of products and components.

Multi-sourcing and supply chain diversification:

- Nvidia should actively pursue a multi-sourcing strategy, diversifying its supplier base across
different regions and countries. This can help mitigate the impact of localized disruptions and
ensure a more stable supply of critical components.

Nearshoring and localization:

- To reduce dependence on global supply chains and minimize transportation risks, Nvidia could
explore nearshoring and localizing certain aspects of its supply chain. This could involve
partnering with local suppliers or establishing regional manufacturing and distribution centers
closer to end markets.

Supply chain visibility and traceability:

- Implementing technologies like blockchain and IoT sensors can improve supply chain visibility
and traceability. This can help Nvidia monitor the movement of goods, identify bottlenecks,
and respond quickly to disruptions.

2. Continued Focus on AI and Machine Learning:

Research and Development:

- Nvidia should continue to invest heavily in research and development of its GPUs for AI and
machine learning workloads. This includes exploring advanced chip architectures,
parallelization techniques, and specialized hardware to accelerate AI

Edge AI and IoT:

- As AI extends beyond data centers and cloud environments, Nvidia should explore
opportunities in edge AI and Internet of Things (IoT) applications. This could involve
developing specialized low-power GPUs and software stacks for edge devices and embedded
systems.

Talent acquisition and partnerships:

- To maintain its leadership in AI and machine learning, Nvidia should continue to attract top
talent in the field and foster partnerships with leading academic institutions and research labs.
This can fuel innovation and ensure access to cutting-edge advancements.
3. Diversify revenue streams & reduce reliance on cryptocurrency mining:

Rationale: By diversifying their revenue sources and reducing dependence on the volatile
cryptocurrency market, NVIDIA can mitigate the impact of future fluctuations in the crypto industry
and maintain a more stable and predictable revenue stream.

Focus on developing more products and solutions for the gaming, data center and artificial intelligence
(AI) markets, markets with high demand and stable growth.

Expand their line of GeForce GTX GPUs for the gaming market, focusing on delivering cutting-edge
performance and features for the latest AAA game titles and eSports competitions.

Develop specialized Quadro and Tesla GPU products for the data center and enterprise AI market,
targeting applications such as machine learning, deep learning, and high-performance computing.

Invest in the development of the next-generation Ampere and Hopper GPU architectures to maintain
their technological leadership in the gaming and AI/data center spaces.

REFERENCES

Anh Đ. (June 06, 2024). Nvidia vượt Apple thành công ty niêm yết lớn thứ hai tại Mỹ

Trang N. (June 19, 2024). Hành trình tăng giá gần 6.000 lần của cổ phiếu Nvidia

GuruFocus Research. (February 22, 2024). Decoding NVIDIA Corp (NVDA): A Strategic SWOT
Insight

BRB C. (January 19, 2022). Road to Success: NVIDIA’s Product Strategy Playbook

Ken Br. (April 6, 2022). NVIDIA Brings GPU, HPC and AI Expertise to COVID-19 Battle

Britannica M. (June 19, 2024). NVIDIA Corporation

Leswing K. (June 2, 2024). Nvidia dominates the AI chip market, but there’s more competition than
ever

Goel S. (January 5, 2023). What does Nvidia do: Business model analysis?