Nvidia's Valuation is Becoming an A.I. Titan

Hey Everyone,

Nvidia's GTC event will be bigger than ever in March, but first we have earnings this week.

Nvidia surpassing Amazon and Google? It really happend.

Artificial intelligence (AI) is one of the hottest technology trends right now, and investors broadly are looking to invest in companies that could win big from this tech.

"Between them, the AI-hyped duo of Microsoft and Nvidia — the new Wintel — are worth $4.8 trillion, more than Amazon, Alphabet, and Meta combined." - Axios

Generative AI is moving mountains of cash so far in 2024. It's nearly hard to believe, look at this graph carefully.

But is Generative AI even a proven technology? Is demand really going to continue at the same pace? Read my deep dive: https://lnkd.in/gGyTX2Dp

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SoftBank founder Masayoshi Son wants $100 billion for a new AI chip venture.

This project codenamed Izanagi, appears to be different from Sam Altman's project. SoftBank founder Masayoshi Son hopes to raise $100 billion so that he can build an AI chip venture that can compete with Nvidia. But who can actually compete with Nvidia when they have 80% of the market of AI chips? Nobody anytime soon is the easy answer.

With earnings on deck this week, things are going to get very interesting for Nvidia and its $NVDA stock. It's up nearly 51% already in 2024.

So what can we expect in terms of numbers. Revenue is projected at $20.5 billion, up 238% from a year earlier. Revenue for its data center business alone may be $17 billion. Gaming revenue is expected to hit $2.7 billion.?As impressive as Sora by OpenAI seems with a flashy text-to-video narrative in a teaser recently, it won't move markets or possibly ever become profitable.

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.

“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.”

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

BigTech and AI

Nvidia's Custom Chip Play is a new Moat for AI Chip Leadership

Hey Everyone, I wrote this for another publication this morning, and tried to restack it to this Newsletter, but was unable to do so, so here it is since it’s related to our thesis about how well Nvidia anticipates, pivots and keeps building moats in its A.I. chip leadership…

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 NVDA 0.00%↑ , TSMC TSM 0.00%↑ , ASML ASML 0.00%↑ , Super Micro Computer SMCI 0.00%↑ and ARM ARM 0.00%↑ . 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)

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 SOUN 0.00%↑ 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.

• NNOX 0.00%↑ was up 50% in just a single day on the news.
• RXRX 0.00%↑ is up 26% so far this year.
• ARM 0.00%↑ 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.

Try it Today

“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's H200, high-end A.I. Chip Increases its Dominance

Nvidia has around a 75 to 80 percent marketshare in the A.I. chip space.

https://aisupremacy.substack.com/t/nvidia

Read more on 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.

Read the full deep dive here .