Nvidia: A Moat In AI GPU Technology

Aug. 25, 2023 9:38 AM ET NVIDIA Corporation (NVDA)

Summary

• Nvidia is a leader in AI and high-performance computing, offering innovative products and solutions for various industries.
• The Hopper architecture, consisting of the H-100 Tensor Core GPU and the Grasshopper General Purpose GPU, will provide unprecedented performance and scalability for data centers.
• There is a severe shortage of H-100 GPUs, which are required for training large language models and image recognition AI models.
• The stock is undervalued using the forward PEG ratio, popularized by the legendary investor Peter Lynch.

The article discusses Nvidia’s (NVDA) leadership in AI and high-performance computing, its innovative products and solutions, and its Hopper architecture, which includes the H-100 Tensor Core GPU and the Grasshopper General Purpose GPU. Here are the key points from the article:

Nvidia’s Leadership in AI and High-Performance Computing:

1. Nvidia is a leader in AI and high-performance computing and offers a wide range of products and solutions for various industries.
2. The company plays a significant role in GPU manufacturing, used in AI model training, virtual reality technologies, crypto mining, and gaming consoles.

The Hopper Architecture:

1. Nvidia’s Hopper architecture represents the next generation of GPU technology, offering unparalleled performance, scalability, and security for data centers.
2. The Hopper architecture consists of two types of GPUs: the H-100 Tensor Core GPU and the Grasshopper General Purpose GPU.
3. The H-100 GPU is a powerful AI-focused chip designed to handle multiple applications and deep neural networks simultaneously.
4. The Grasshopper GPU is a versatile general-purpose GPU designed for gaming, simulations, and creative applications.

Applications in Drug Discovery and Clinical Data Analysis:

1. Nvidia collaborates with research institutions and companies to leverage transformer neural networks for drug discovery and clinical data analysis.
2. Transformer-based neural network architectures like GPT-4 enable researchers to use massive datasets for self-supervised training, avoiding the need for manually labeled examples.
3. Nvidia partners with AstraZeneca to develop a transformer-based generative AI model for chemical structures used in drug discovery.
4. The company’s technology is used by institutions like the University of Florida to develop clinical language models for faster research and medical decision-making.

Financial Performance and Valuation:

1. Nvidia’s financial performance has been strong and consistent, with significant cash reserves and impressive quarterly revenue growth.
2. The company expects robust sales in the coming quarters, with Q3 sales guidance well above analyst estimates.
3. Using the forward PEG ratio (forward 1-year EPS/forward 1-year EPS growth), the stock is considered undervalued, with a ratio of less than 1.

Investment Perspective:

1. The author views Nvidia as a leader in the AI revolution and sees the H-100 chip as a significant milestone for the company.
2. The stock is considered a buy-and-hold investment with expectations of strong earnings growth over the next decade.
3. Rivals like AMD and Google have attempted to compete in AI GPU chips but have been unable to match Nvidia’s technological prowess.

Risks:

1. Risks associated with the investment include the potential inability to sustain recent earnings growth, increased competition, and other factors.
2. The article emphasizes that it represents the author’s opinion and not investment advice, and readers should conduct their own research before making investment decisions.

The article also notes that Nvidia recently announced a $25 billion share buyback, which is expected to support the company’s stock price.

Please note that this article reflects the author’s analysis and opinions, and investors should perform their own due diligence before making investment decisions.

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