Hey Everyone,
I’m biased and I’d like to explain how I see myself in this context. In a nutshell, I’m a techno-skeptic when it comes to OpenAI, as much as I’m a techno-optimistic about Nvidia, and it comes down to fundamentals as an investor and analyst.
Listen carefully to how Nvidia’s CEO Jensen Huang (黃仁勳), a Taiwanese American conducts himself.
Watch the Video
“We are at the beginning of a new industrial revolution with the emergence of artificial intelligence, similar to the industrial revolutions that took place with the production of energy from steam and electricity and the emergence of computers, as well as the Internet revolution.”
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My favorite Nvidia evangelist these days on social media these days has to be Jim Fan (Linxi) who most recently explained Nvidia Chat with RTX. LJF is also an important robotics evangelist.
Nvidia a Leader in Customer A.I. Chips
Let’s take a journey of why I’m bullish about Nvidia both as a company, stock and as a leader in Generative AI as an accelerationist company opening up large language model technologies to many parts of the world in 2024.
Hyperscale Semi, GPU and Datacenter Stocks are Tethered to Nvidia’s Price Now
Nvidia is a major component of the global semiconductor supply chain along with TSMC. So this week shares of TSMC reached an all-time high on February 15th, 2024 after Morgan Stanley lifted the price target on its Nvidia. Just as when Bitcoin goes up it impacts other cryptos and blockchain stocks or when Tesla going up used to impact other EV stocks, we are seeing the same thing with Nvidia and datacenter and semiconductor stocks. Nvidia is single handedly moving markets during the last six months like few things we’ve seen in recent times.
The Generative AI bull market is due to Nvidia in more ways than we can count.
✨ Semiconductor, Datacenter and A.I. Chip Bull Market
The semiconductor industry and A.I. chip ecosystem in my mind now pivots around a few key names, they include the likes of Nvidia , TSMC , ASML , Super Micro Computer and ARM . I would add that China is pushing hard to become more self-reliant in this space including SMIC, Huawei and others.
Nvidia (Santa Clara, US)
Taiwan Semiconductor Manufacturing Company (Taiwan)
ASML Holding (Netherlands)
Super Micro Computer (San Jose, US)
Arm Holdings PLC (Cambridge, UK)
Semiconductor Manufacturing International Corporation (SMIC) – (Shanghai, China)
I’ve recently asked to look into AI stocks for us in a future deep dive article coming soon to A.I. Supremacy.
Nvidia’s lead in the AI chip race has made it the fourth most valuable company in the world.
📊 Nvidia Surpassing Google and Amazon in Market Valuation is Symbolic
Nvidia is now the third largest U.S. company, only behind Apple and Microsoft.
Nvidia passing the likes of Google and Amazon even in the hyperscaling ‘magnificent seven’ is a testament to the AI momentum. The symbolic milestone is more confirmation that Nvidia has become a Wall Street darling on the back of elevated AI chips sales that may be an epic A.I. stock bubble or point to future growth on the success and proliferation of demand for Generative AI across industries and globally.
Even small moves of Nvidia are impacting other businesses rather dramatically. Take the example of for example. Nvidia revealed its new stakes as of Dec. 31 in a 13-F filing with the US Securities and Exchange Commission late on Wednesday and in the filing, the chipmaker said it took a stake worth nearly $3.7 million in SoundHound AI, a developer of conversational voice assistants. At the time of writing the stock is up over 50%.
We saw this happen this week with multiple names. Since a filing by Nvidia shows the chipmaker has stakes in a handful of public companies. These include Arm, SoundHound AI, Recursion Pharmaceuticals, Nano-X Imaging, and TuSimple.
was up 50% in just a single day on the news.
is up 26% so far this year.
easily the biggest beneficiary of its Nvidia relationship is up almost 96% this year.
💡 Chat with RTX
NVIDIA recently released Chat with RTX. Why is it significant?
It’s NVIDIA’s first step towards the vision of “LLM as Operating System” – a locally running, heavily optimized AI assistant that deeply integrates with your file systems, features retrieval as the first-class citizen, preserves privacy, and leverages your desktop gaming GPUs to the full. A web-hosted version will have a hard time matching the same functionality.
NVIDIA is going local even before OpenAI.
“One of the best contributions we have made is the development of computers and artificial intelligence a million-fold in the past ten years, and therefore we have to take into account that it will be faster and more efficient.” – Jensen Huang, CEO Nvidia.
🧠 Jensen Champions Sovereign AI
In the first video on this Newsletter, the CEO of Nvidia talks about an important concept:
Nvidia CEO Jensen Huang says countries should own their own AI systems.
Huang said nations should ensure they control both the production of AI and the data produced.
The Nvidia founder told the World Governments Summit in Dubai this week that countries needed to work toward building “sovereign AI.”
Just like being an advocate for open-source, Sovereign AI is widely seen as culturally very important for countries to retain their distinctiveness, language, history, ethnic heritage and mental models that are unique to them in this time of rapid digitization.
Huang said countries should ensure they own the production of their intelligence and the data produced.
Nation states and especially smaller countries need to protect themselves from larger countries and the most powerful companies in the world and the technological homogenization of the times.
Nvidia to me thus feels agnostic and yet on the right side of history in many ways, quite unlike OpenAI and Sam Altman’s fear-mongering or AGI-exaggerating, that I have gone through before in other posts.
I really believe Nvidia is contributing the most globally along with their partnership with TSMC to the democratization of AI the most of any company out there right now in February, 2024.
💥 Nvidia will Soon be a 2 Trillion Dollar Company
Nvidia’s stock is up 221% in the past year and will this year likely eclipse $2 Trillion in market value. It’s currently $1.795.
The company is currently making the H100 chip, which powers the majority of LLMs in use today, including OpenAI’s ChatGPT and the majority of AI projects from Microsoft, Meta, and Amazon. The H100 chip in 2023 became the most sought after $40,000 hardware and the demand for this chip become one of the most important drivers in AI in recent memory.
The Santa Clara-based firm is close to releasing a superior AI chip, the H200, which has more memory capacity and bandwidth than its predecessor. We talked about this three months ago on this Newsletter:
Nvidia has around a 75 to 80 percent marketshare in the A.I. chip space.
https://aisupremacy.substack.com/t/nvidia
AI’s boom over the last year is largely to thank for NVIDIA’s jump in valuation
In January, Mark Zuckerberg said Meta will buy 350,000 of NVIDIA’s H100 chips by the end of the year.
Jensen Huang (黃仁勳) has recently also spoken about how more Governments will be ordering their A.I. chips to build their own linguistic and national models so as not to be left behind in A.I.
“There are some interests to scare people about this new technology, to mystify this technology, to encourage other people to not do anything about that technology and rely on them to do it. And I think that’s a mistake,” Huang said.
🔥 Nvidia’s Business Visualized
Nvidia’s earnings data is February 21st, 2024 and we’ll know more soon in a week’s time.
Revenues are expected to be $20.18 billion, up 233.5% from the year-ago quarter.
You can read the Earnings of their last quarter here.
Nvidia’s last earnings report showed record revenue of $14.51 billion in the third quarter, marking a 279% gain from the same quarter in the prior year.
Nvidia’s stock is up 380% since the end of 2022. It uniquely anticipated the A.I. trend and made preparations for it as far back as 2017.
Nvidia was by far the best performing component of the S&P 500 in 2023, and could be again in 2024.
Many analysts consider Nvidia’s stock price ‘cheap’ compared to future revenue even above $700.
“It is not an energy or food revolution, but rather the production of intelligence, and therefore every country must own the production of its own intelligence, and here comes the idea of ‘sovereign artificial intelligence’, so that the country possesses data to document its history and future.” – Jensen Huang, CEO of Nvidia.
So obviously he’s doing business development for his company first and foremost but I still think he struck the right tone at the UAE event.
Nvidia’s GTC 2024 Event is coming up soon and will be more key than ever. It’s at San Jose Convention Center on March 18-21, 2024.
The Big Four
While I am not confident on the performance of Tesla, Apple or Google in recent times, Nvidia and Meta (and to a lesser extent Microsoft) have been more carefully managed with the Generative AI boom.
Frankly the performance of Google, Apple, Amazon and Tesla have been embarrassing so far compared to how pivotal the role of Nvidia and even Meta’s Llama-2 model has been. AMD another important AI chip maker could also have a very good 2024.
📈 Nvidia’s Datacenter Growth
For Nvidia, Data Center compute revenue quadrupled from last year, Networking revenue nearly tripled.
Nvidia is uniquely positioned to benefit in emerging tech like next-gen gaming, automation, automotive, quantum and robotics.
Nobody could have guessed how pivotal AI chips and hardware would become after Generative AI LLMs got going in 2023. Many analysts were actually predicting the opposite. The surprise factor has and Nvidia’s monopoly on the space has also made it even more valuable. Nvidia is valued even more highly than the large software companies and cloud providers that developed many of the AI techniques that power the boom.
Google was largely expected to benefit from AI, especially since employees at the company pioneered many of the techniques — such as transformer architecture — used in cutting-edge models like ChatGPT. But with an exodus of their talent, poor launches and problematic execution relative to OpenAI, Alphabet has been a major disappointment.
Amazon for its part has lost out to Microsoft Azure in their branding of Generative AI and struggles even for headlines. Meta’s business execution in its year of efficiency has made it an incredible rebound stock from its dip late 2022, but nothing quite like Nvidia’s rise to dominance.
After tripling in value in 2023, the company has managed to add another 40 per cent to its market cap in the first six weeks of 2024 and now finds itself in some truly rarified air. – Bloomberg.
🚀 Nvidia is More Diversified than Many Realize
Datacenter (A.I. Chips)
Gaming
Professional Visualization
Automotive
Insights and Infographic by – The Strategy Deck
By
🟢 Nvidia has Invested in the beest A.I. Startups:
In my estimation Nvidia also was the top BigTech investor in the Generative AI ecosystem at large including in:
AI21Labs, alongside Google (see above)
Runway, together with Salesforce and Google (see above)
Cohere, by participating in its US$270 million Series C in June
Inflection, alongside Microsoft and Google (see above)
Adept AI, alongside Microsoft (see above)
Mistral, by participating in its EUR450M funding round in December
Hugging Face
CoreWeave
Nvidia participated in 35 deals in 2023, marking a significant increase from the previous year and making it one of the most active investors in the AI space, the Financial Times (FT) reported (Dec. 11), citing estimates by Dealroom.
They key is all the companies in Nvidia’s portfolio are also customers of the chipmaker, utilizing either its GPU chips or software, according to the report. Nvidia has been the ultimate win-win for its partners.
Speed of Execution in BigTech around Generative AI
Nvidia > Microsoft > OpenAI > Google > Amazon
This is my rationale for saying that Nvidia is democratizing AI way more than Microsoft, OpenAI or anybody else and it’s pretty damn obvious in 2024. Nvidia has done this about as much as the entire LLM open-source community in 2023 put together!
Image by
That being said, Generative AI is overly concentrated in a few hyperscale mag seven companies that already own advertising, the cloud and the key real-estate of the entire internet including search.
Nvidia’s rise is in a sense a natural result of index funds and the cash-cows of digital advertising, the Cloud and AI as relative hacks of U.S. capitalism. Now it appears the pursuit of datacenters and the race for A.I. chips joins that trifecta.
Digital Advertising
Cloud computing
Generative AI
Datacenters and AI chips
Silicon Valley’s winners now are elements of monopoly capitalism that is eating the world. Just as Tesla races to build factories in different parts of the world now the same will occur with GPU factories and data centers of various kinds. New kinds of A.I. chips will emerge and their supercomputing equivalents and hybrid quantum supercomputers.
Nvidia is now nearly guaranteed to be at the forefront in all of this.
Nvidia for all of its agnostic hardware charm didn’t just the rarified league of Magnificent Seven stocks, it’s gone past them.
The Global Leader in Higher Performance Computing (HPC)
The NVIDIA GH200 Grace Hopper™ Superchip is a breakthrough accelerated CPU designed from the ground up for giant-scale AI and high-performance computing (HPC) applications.
Nvidia has an estimated 75% share of the fast-growing AI chips market, which could potentially drive its annual revenue to $300 billion in 2027.
Nvidia invested $872 million in cash in “non-affiliates” in the first nine months of 2023, up from $83 million during the same period a year earlier. Nvidia is best positioned to keep investing in A.I. startups in 2024 and the rest of the 2020s in the most diversified manner that also helps scale its business even more.
Nvidia is now the third largest U.S. company, only behind Apple and Microsoft. Nvidia reports quarterly earnings on Feb. 21. Analysts expect 118% annual growth in sales to $59.04 billion.
“We’re at the beginning of this new era. There’s about a trillion dollars’ worth of installed base of data centers. Over the course of the next four or five years, we’ll have $2 trillion worth of data centers that will be powering software around the world,” he said. [Bloomberg]
Nvidia is also very busy trying to optimize their A.I. chips with A.I. itself. Nvidia’s GPUs are in high-demand — and the company is using AI to accelerate chip production.
The chip giant’s custom AI model, ChipNeMo, aims to speed up the chip design process.
Altman (OpenAI with participation form the UAE) and other AI developers are seeking ways to diversify their hardware options, including by exploring chipmaking ventures of their own. However they have little chance of catching Nvidia any time soon, in fact their efforts could squeeze even more revenue out of the current market leaders like TSMC and Nvidia itself and this all ties into their ability to to custom AI chips for their global customers, itself thought to be a $30 billion business in the years ahead.
Nvidia will Lower the Cost of AI chips and Generative AI Compute
Nvidia has “democratized” AI by making a common platform with its Nvidia GPUs. This will soon lower the cost of GPUs and AI chips to the degree that LLMs and Copilots could also be more accessible and perform better.
Use case of Generative AI set to Grow in 2024 to 2027 Exponentially
Circa 2023 we thought of Generative AI in terms of content generation or companion chatbots, but that’s the real value of this tech. AI startups building proprietary LLMs in healthcare, law, science, biotechnology, drug development, education, chip design, finance, banking and other avenues will unlock the real value in the years ahead.
The idea that platform Copilots or text interface chatbots are great products of Generative AI is foolhardy. Those were just natural language applications that were catalysts for the trend.
Nvidia’s Upcoming Earnings
Wall Street expects Nvidia to post $11.38 billion in fourth-quarter profit, up more than a staggering 400% from a year ago. Its revenue is expected to surge more than three-fold to $20.37 billion.
If things are good, there’s no reason not to expect that Q4 Earnings could launch Nvidia to being a $2 Trillion company.
In stock speak, AI is driving all the major hyper-scalers to new heights and Nvidia is the chip maker behind them. Also relative to other BigTech stocks, this is just savage growth rarely seen before at that scale.
With an 80% market share, no one can touch Nvidia in the graphics processing unit (GPU) market. With Intel on the decline for years, only AMD could snag a little bit more of the market.
AI accelerators, including GPUs, are going to remain in high demand for the foreseeable future. Until something better comes along and when it does, it will likely be invented by Nvidia again.
Nvidia’s Failed Acquisition of ARM still Relevant
Nvidia’s largest investment that I’m aware of is that of $147.3 million in Arm Holdings, the chip designer that Nvidia failed to buy after the $80 billion deal hit the antitrust hurdle two years ago. The result? ‘s stock is up 83.6% just this year in 2024 so far.
Due to the explosion of Data center interest in recent times, investors are scrambling to find stocks that are set to benefit from it. One name they have settled on is Super Micro Computer. That stock is up 237% just in 2024 YTD at the time of writing.
Nvidia and China Semiconductor Industry
Meanwhile China is quietly reducing its reliance on foreign chip technology even as Nvidia found work-arounds to the AI chip ban to still provide for China. Firms such as Huawei are rapidly cultivating local suppliers and China innovating faster in semiconductors than anticipated in 2024 thus far. China’s biggest chipmaker SMIC seems to have been manufacturing advanced chips in the last few months — defying U.S. sanctions designed to slow down Beijing’s progress. The H20 chip is the most powerful of three China-focused chips Nvidia developed to meet restrictions announced in October, 2023.
In addition to the H20, Nvidia planned two other chips that comply with the new restrictions – the L20 and L2. NVIDIA has begun accepting pre-orders for its customized artificial intelligence (AI) chips tailored for the Chinese market. We should not underestimate Nvidia’s customers in China in evaluating its growth prospects as a company. The H800, also tailored for China, was banned in October last year.
Nvidia CFO Collette Kress told analysts, “The enterprise wave of AI adoption is beginning.”
If Apple and Tesla have uncertain futures in China, for Nvidia it might just be the beginning.
Many have speculated that China has still been able to purchase Nvidia chips banned by the U.S. via Middle East associations. It will be interesting to me when Cerebras goes IPO likely this year. Cerebras is also in talks to raise funds privately before the IPO and will likely be able to do so since the market for AI chips is so hot.
Cerebras Systems Inc. is an American artificial intelligence company with offices in Sunnyvale and San Diego, Toronto, Tokyo and Bangalore, India. Cerebras builds computer systems for complex artificial intelligence deep learning applications. They also have ties to G42 their client that has ties to China. The result is China’s PLA and Government can still acquire banned chips, though through roundabout methods.
Nvidia’s Fastest Supercomputer called EOS
Nvidia’s is also providing updates on its business on a more regular basis.
The first public glimpse into the architecture of Eos, its newest enterprise-oriented supercomputer designed for advanced AI development at the datacenter scale, and the company’s fastest AI supercomputer.
If you are a tech nerd like me you like to try to understand the specs too:
The Eos machine, currently being used by Nvidia itself, is ranked as the world’s No. 9 highest performing supercomputer in the latest Top 500 list, which is measured in FP64; in pure AI tasks, it’s likely among the fastest.
Meanwhile, its blueprint can be used to build enterprise-oriented supercomputers for other companies too.
Nvidia’s Eos is equipped with 576 DGX H100 systems, each containing eight Nvidia H100 GPUs for artificial intelligence (AI) and high-performance computing (HPC) workloads.
In total, the system packs 1,152 Intel Xeon Platinum 8480C (with 56 cores per CPU) processors as well as 4,608 H100 GPUs, enabling Eos to achieve an impressive Rmax 121.4 FP64 PetaFLOPS as well as 18.4 FP8 ExaFLOPS performance for HPC and AI, respectively.
In 2024 Nvidia is the steam engine of the magnificent seven. While other big tech shares have hardly performed badly in 2024, juxtaposed with Nvidia’s rally they appear to be relegated to the slow lane.
While I do believe AI stocks are in a bubble over Generative A.I., what will need at least a decade to mature, I can appreciate the enthusiasm and Nvidia’s datacenter and AI chip leadership is immense and I don’t see how anyone can catch them anytime soon as of the mid 2020s.
Wall Street analysts are seeing signs of continued robust demand for Nvidia’s AI H100 accelerators and it has a lot of good products in the pipeline. Nvidia’s stock is turning me into a semiconductor watcher, and I’m likely a better investor for it.
However the boom and bust sentiment in the markets is also a result of the Fed’s massive stimulus. However timed with interest rates going down and that the Fed is likely to cut rates perhaps as early as June, 2024, Nvidia’s timing couldn’t be more brilliant.
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