The $300 billion reason to buy Nvidia shares now
Nvidia (NASDAQ: NVDA) stock has retreated from its June peak as the stock market appears to be debating the future of the AI boom.
Some investors believe the rally has overheated because new technology hasn't spawned “killer apps” yet or caused major disruptions to the economy. There was evidence of this when Alphabet and Microsoft shares retreated following recent earnings reports as investors questioned the level of spending on AI infrastructure and wondered if those tech giants would get a return on those investments.
But there are plenty of AI bulls left, and among them is former Google CEO Eric Schmidt. In a recent conversation at Stanford University, Schmidt commented on the evolution of artificial intelligence and stated that companies are planning to spend tens or even hundreds of billions of dollars on AI infrastructure. For example, Microsoft and OpenAI are planning a large-scale data center and supercomputer project known as Stargate AI, which could cost as much as $100 billion.
Schmidt continued, “(OpenAI CEO) Sam Altman is a close friend. He believes it will cost around 300 billion dollars, and probably more...” “That” here refers to meeting AI infrastructure needs.
Continuing, he said, “If all 300 billion dollars go to NVIDIA, you know what to do in the stock market,” but added, “That's not a stock market recommendation.”
Still, when it comes to AI, the build-out has just begun, so it's a reminder for investors to keep an eye on long-term goals.
300 billion dollars may be just the beginning
Keep in mind that Schmidt's quote is just referring to infrastructure needs for open OpenAI, so if that's correct, industry demand is far greater than that.
In fact, Sam Altman is also trying to raise $7 trillion to expand the global semiconductor industry in order to achieve artificial intelligence (AGI) as capable or as capable as humans.
AGI is OpenAI's goal, and other tech visionaries like Tesla's Elon Musk are working towards it. Investors should expect to continue building the computing power they need until AGI is achieved. Nvidia CEO Jensen Huang predicts that general artificial intelligence is 5 years away, so the market is likely to increase AI investment in the meantime.
What that means for Nvidia
Overcoming market volatility and questions among investors, nothing has changed about the tech industry's expectations for AI. The competition between “Magnificent Seven” and other companies will determine the next generation of industry winners, and it is important to build the necessary infrastructure.
Nvidia continues to be a far-flung leader in data center GPUs and other components needed to run AI models like ChatGPT, and is likely to continue dominating that market even as competition from AMD and Intel comes online.
Nvidia has an estimated 98% share of the data center GPU market in 2023, and the company's data center revenue increased 427% to 22.6 billion dollars in the first quarter. That growth rate will slow as it surpasses the initial generative AI investment boom following the launch of ChatGPT, but Nvidia will almost certainly grow at a higher rate as competition for AGI accelerates.
Investors can argue about the proper valuation of Nvidia stock, but it's hard to dispute the strength and future potential of that business. According to AGI Needs and statements such as Schmidt and Altman, the product demand ramp still has a long way to go.
In fact, Schmidt's biggest concern about the proliferation of AI infrastructure was finding enough power to power these large data centers. That might be a challenge in the future, but taking his advice and buying Nvidia shares makes a lot of sense now.
Some investors believe the rally has overheated because new technology hasn't spawned “killer apps” yet or caused major disruptions to the economy. There was evidence of this when Alphabet and Microsoft shares retreated following recent earnings reports as investors questioned the level of spending on AI infrastructure and wondered if those tech giants would get a return on those investments.
But there are plenty of AI bulls left, and among them is former Google CEO Eric Schmidt. In a recent conversation at Stanford University, Schmidt commented on the evolution of artificial intelligence and stated that companies are planning to spend tens or even hundreds of billions of dollars on AI infrastructure. For example, Microsoft and OpenAI are planning a large-scale data center and supercomputer project known as Stargate AI, which could cost as much as $100 billion.
Schmidt continued, “(OpenAI CEO) Sam Altman is a close friend. He believes it will cost around 300 billion dollars, and probably more...” “That” here refers to meeting AI infrastructure needs.
Continuing, he said, “If all 300 billion dollars go to NVIDIA, you know what to do in the stock market,” but added, “That's not a stock market recommendation.”
Still, when it comes to AI, the build-out has just begun, so it's a reminder for investors to keep an eye on long-term goals.
300 billion dollars may be just the beginning
Keep in mind that Schmidt's quote is just referring to infrastructure needs for open OpenAI, so if that's correct, industry demand is far greater than that.
In fact, Sam Altman is also trying to raise $7 trillion to expand the global semiconductor industry in order to achieve artificial intelligence (AGI) as capable or as capable as humans.
AGI is OpenAI's goal, and other tech visionaries like Tesla's Elon Musk are working towards it. Investors should expect to continue building the computing power they need until AGI is achieved. Nvidia CEO Jensen Huang predicts that general artificial intelligence is 5 years away, so the market is likely to increase AI investment in the meantime.
What that means for Nvidia
Overcoming market volatility and questions among investors, nothing has changed about the tech industry's expectations for AI. The competition between “Magnificent Seven” and other companies will determine the next generation of industry winners, and it is important to build the necessary infrastructure.
Nvidia continues to be a far-flung leader in data center GPUs and other components needed to run AI models like ChatGPT, and is likely to continue dominating that market even as competition from AMD and Intel comes online.
Nvidia has an estimated 98% share of the data center GPU market in 2023, and the company's data center revenue increased 427% to 22.6 billion dollars in the first quarter. That growth rate will slow as it surpasses the initial generative AI investment boom following the launch of ChatGPT, but Nvidia will almost certainly grow at a higher rate as competition for AGI accelerates.
Investors can argue about the proper valuation of Nvidia stock, but it's hard to dispute the strength and future potential of that business. According to AGI Needs and statements such as Schmidt and Altman, the product demand ramp still has a long way to go.
In fact, Schmidt's biggest concern about the proliferation of AI infrastructure was finding enough power to power these large data centers. That might be a challenge in the future, but taking his advice and buying Nvidia shares makes a lot of sense now.
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