Nvidia CEO Jensen Huang expressed skepticism about Sam Altman’s reported attempt to raise $7 trillion to boost GPU-chip supply for artificial intelligence (AI) processing. Huang, speaking at the World Governments Summit in Dubai, suggested that the cost of developing AI wouldn’t be as high as Altman’s target. He estimated that building AI data centers globally would cost around $2 trillion over the next five years. Huang emphasized the need to consider technological advancements that could make computers faster, reducing the total required investment. Altman, the chief of OpenAI, has been seeking funds to address the global chip shortage and increase semiconductor supply.

Key Points:

• Context: Altman, chief of OpenAI, aims to raise funds, including talks with the UAE government, to address the global chip shortage. Nvidia, a major player in the AI-chip market, questions the projected $7 trillion cost.
• Huang’s Quip: During the summit, when asked about Altman’s funding target, Huang humorously remarked that $7 trillion could buy “apparently all the GPUs.”
• AI Infrastructure Costs: Huang estimates that building AI data centers globally would cost $2 trillion over the next five years. He emphasizes the role of technological advancements in making computing more efficient.
• Skepticism on Costs: Huang challenges the assumption that buying more computers would be the only solution, highlighting the importance of considering advancements that may reduce the overall need for computing resources.
• Nvidia’s Position: Nvidia, with a significant share in the AI-chip market and a worth of nearly $1.8 trillion, has been in talks with companies like OpenAI, Microsoft, Google, and Meta to develop custom chips for data centers.
• AI Division: Nvidia is reportedly planning to create a dedicated division for designing data-center chips and AI processors for cloud-computing firms.
• Market Response: Nvidia’s comments come amid growing concerns about the global chip shortage, with implications for various industries. The company is positioned as a key player in addressing the increasing demand for AI-related computing resources.

It’s essential to note that comments made at the summit reflect Huang’s perspective and the ongoing dynamics in the semiconductor and AI industries.

Market Performance Overview

Financial Projections

• Expected Q4 Profit: $11.38 Billion (400% YoY increase)
• Expected Q4 Revenue: $20.37 Billion (Three-fold increase)

Stock Valuation

• Current P/E Ratio: 33.19 times forward earnings estimates
• Industry Median P/E Ratio: 27.35 times forward earnings estimates

A higher multiple suggests that the stock might have limited room for further growth.

Market Position

1. NVIDIA has surpassed Amazon.com in market value, securing the fifth position.
2. Microsoft, having previously overtaken Apple, claims the title of the largest U.S. company.

Analysts’ Caution

• NVIDIA’s current stock valuation may have already priced in much of its earnings potential.
• Higher multiples indicate limited room for further growth.

FAQ

Q: What factors contributed to NVIDIA’s market surge? A: NVIDIA’s dominant position is driven by the soaring demand for its chips used in artificial intelligence computing, with a 231% stock surge over the past year.

Q: How does NVIDIA’s stock performance compare to Alphabet’s? A: NVIDIA’s market value of $1.83 trillion now surpasses Alphabet’s $1.82 trillion, marking a significant milestone.

Q: What are the expectations for NVIDIA’s fourth-quarter results? A: Wall Street anticipates a remarkable performance with a projected profit of $11.38 billion and revenue of $20.37 billion.

Q: Is there any cautionary advice for investors? A: Analysts caution that NVIDIA’s stock, trading at 33.19 times its forward earnings estimates, might have priced in much of its earnings potential, leaving limited room for further growth.

Q: How does NVIDIA’s position impact the broader tech industry? A: NVIDIA’s ascent to become the third-largest U.S. company underscores the growing significance of artificial intelligence and its substantial impact on the tech industry.

Key Points

• Impressive Performance: AMD’s stock has surged by 123% over the last year, reflecting a strong market performance.
• AI Growth: The boom in artificial intelligence (AI) is driving demand for graphics processing units (GPUs), benefiting chipmakers. AMD, in particular, is seen as having significant growth potential in this space.
• Market Cap and Growth Potential: While Nvidia has exceeded a market cap of $1 trillion, AMD’s current market cap is $286 billion. Analysts suggest that this indicates substantial long-term growth potential for AMD.
• New AI GPU: AMD is strategically positioned to challenge Nvidia with its new AI GPU, the MI300X. The company claims that this GPU competes favorably with Nvidia’s offerings for training and surpasses them by 10% to 20% for inference.

Market Data (as of February 14, 2024)

• Ticker: NASDAQ: AMD
• Market Cap: $289 billion
• Current Price: $178.70
• Day’s Range: $172.88 – $178.74
• 52wk Range: $75.92 – $184.92
• Volume: 57,402,522
• Avg Vol: 70,033,972
• Gross Margin: 37.88%

Growth Factors

1. AI Market Opportunity

• The AI market reached nearly $200 billion in the previous year, with a projected CAGR of 37% through 2030.
• AMD’s MI300X chip positions the company well in the AI sector, aiming to capture a share of this rapidly growing market.

2. Microsoft and Meta Partnerships

• Microsoft has chosen AMD’s GPU for its Azure cloud platform, optimizing AI capabilities. The partnership with Microsoft, closely tied to OpenAI, enhances AMD’s standing in the AI space.
• Meta Platforms will also utilize AMD’s new chips, indicating strong industry recognition and adoption.

3. Improving PC Market

• AMD is benefiting from an improving global PC market, with data indicating a 0.3% increase in global PC shipments in Q4 2023.
• The client segment’s revenue rose by 42% year over year to $1.4 billion in Q3 2023.

Future Outlook

• Earnings-per-share (EPS) estimates suggest significant upside potential for AMD’s stock in its next fiscal year, with projections reaching just over $5 per share.
• Multiplying the EPS by AMD’s forward price-to-earnings (P/E) ratio of 45 yields a projected stock price of $239.
• If projections hold true, AMD’s shares could rise by 35% by the end of fiscal 2024, outperforming the S&P 500’s increase of 20% over the last 12 months.

Conclusion

AMD’s strategic focus on AI, key partnerships with industry giants, and positive trends in the PC market position the company for continued growth in 2024. While risks should be considered, the company’s current trajectory makes AMD a compelling investment option, as indicated by the positive EPS estimates and potential stock price growth.