A severe case of COVIDIA: prognosis for an AI-driven equity market
NVIDIA and its GPU customers are now a large driver of equity market returns, earnings growth, earnings revisions, industrial production and capital spending.? NVIDIA’s financial results are extraordinary (it beat on revenues and earnings again last week, and announced a $50 billion stock buyback); NVIDIA has also experienced the fastest road to being the market’s largest stock in the post-war era.
But for investors, the more important questions look past the economics of selling GPUs and focus on the ability of hyperscalers (Google, Amazon, Microsoft, Meta, etc) and other AI infrastructure users/providers to earn adequate returns on hundreds of billions in AI-related capital spending.? The level of this spending now rivals the mainframe era of the late 1960’s and the fiber optic deployment of the late 1990’s.?? For adequate returns on AI infrastructure to materialize, within the next 12-18 months we will need to see a greater shift in favor of “inference” tasks (AI used to run production models for corporate customers) rather than GPU capacity primarily being used to train foundational models and chatbots.? In this Eye on the Market, we take a closer look.
Also: some brief comments on the Third Circuit’s decision to strike down Section 230 protections for certain social media company activities.
Michael Cembalest, JP Morgan Asset Management
Retired Chief Risk Officer at BNY Mellon Investment Adviser, Inc. & BNY Mellon Securities Corporation
2 个月Always appreciate your insights!
Test and Design Manager at Ericsson
2 个月Thank you for this summary. As a person who works in this industry I also see that companies do not want to share their know how (and/or databases) with AI algo's developed outside of their premises which I think is not currently reflected in the business cases of the MSFT,GOOG, AMZN etc.
Data Management Lead, JPMorgan Chase & Co.
2 个月Good compilation of facts and figures on topics that are on investors' minds, as always. Thank you for the analysis and data. I loved the term"Covidia" ??
Chief Executive Officer | Board Advisor | Equity Derivative, Portfolio and Treasury Financing | Expert Witness | Non-Executive Director
2 个月Thank you for sharing your commentary and market update Michael Cembalest.