Source: Wall Street See

Each wave of technological innovation creates its own wealth creation myth, and the "leather jacket master" Huang Renxun has also embraced this great fortune.

On June 5th EST, Nvidia's stock price rose all the way, crossing the $3 trillion market cap mark. On that day, it also surpassed Apple to become the second highest market capitalization company in the world.

The next day, Nvidia's stock price fell slightly, but this volatility did not stop its strides. It took only 66 trading days to cross the $2 trillion market cap mark. By the closing price on June 6, Nvidia only needs to rise by 6% to surpass Microsoft and become the world's largest market cap company. Some investment banks predict that Nvidia's rise is almost certain, and it will be realized as soon as next week after the stock split is completed.

This seems like a metaphor, as the era of AI has surely arrived. Strong market demand and investors' flocking have lifted Nvidia to the throne; however, the market is increasingly worried about whether the next "Cisco moment" will come. Once Nvidia's sales and profit margins decline, the carnival will return to stillness.

The soaring of Nvidia's market cap resides in the gradual dissolving of the capital market's disagreement about it. Dazzling performance, stunning products, and the stimulation of its stock split have made Wall Street believe that it can still break through the "ceiling".

From the perspective of performance fundamentals, Nvidia's total revenue in the first quarter reached $26 billion, more than three times that of a year ago. Nvidia, which sells "AI artillery," is moving steadily towards its peak, and this number will continue to climb to $28 billion in the second quarter.

At high altitudes, Huang Renxun wants to make Nvidia the core infrastructure of the AI era by taking advantage of AI, and firmly bind a group of technology giants to himself in this new era, so as to sit firmly on the throne.

Soaring

Nvidia has achieved an unprecedented myth in the US stock market. Previously, it took more than two years for Apple to go from $2 trillion to $3 trillion, while Nvidia created a miracle in just three months.

At the same time, CEO Huang Renxun's net worth has also soared, breaking through $100 billion and becoming one of the "super rich" with assets exceeding $100 billion on Forbes Global Rich List.

The soaring market demand, as well as investors' enthusiasm, have pushed Nvidia to the top. However, the market is increasingly worried whether the next "Cisco moment" will come. Once Nvidia's sales and profit margins decline, the carnival will return to stillness.

From a performance perspective, Nvidia's total revenue in the first quarter reached $26 billion, more than three times that of a year ago. Nvidia, which sells "AI artillery," is moving steadily towards its peak, and this number will continue to climb to $28 billion in the second quarter.

On June 2nd, Huang Renxun, who appeared at the 2024 Taipei International Computer Show, became the most eye-catching "star" on the scene. He announced that the Blackwell, which had been released for less than 3 months, was already in mass production. What was even more impressive was that Nvidia will update its products annually, and its three-year upgrade plan has surfaced: Blackwell Ultra will be launched in 2025, followed by the new architecture Rubin iteration in 2026, and Rubin Ultra will be launched in 2027.

At the same time, in order to continue consolidating its moat, Nvidia has already turned itself into an "AI factory". During the speech, the "leather jacket master" showcased the powerful ecosystem, which is based on GPU and CUDA, uses various chips and devices, and allows users to continuously link computing power to build massive data centers that become the "power stations" of the AI era.

Whether it's the ultimate pursuit of both hardware and software ecology or the annual upgrade rhythm, Nvidia's "solar term" is to firmly bind a group of technology giants to its own "AI ecosystem" and leave no chance for its opponents to catch their breath.

Wall Street is quite excited about this. Bank of America has raised Nvidia's target stock price to $1,500. Analysts believe that AI is now developing at a high speed, and many top technology and cloud computing companies are still in the experimental stage of training large-language models, so the AI peak in the chip industry has not yet arrived. It is estimated that the annual investment of $250 billion to $500 billion will be needed for the update requirements of global data centers, and only 20% to 30% has been completed so far.

Institutions generally believe that Nvidia will surpass Microsoft to become the global market cap leader, it's just a matter of time. Huang Renxun, however, hopes to add another fire. Not long ago, Nvidia announced that it will "split 1 share into 10" on June 7, allowing more retail investors to get on its fast-moving train, providing impetus for the continued high stock prices. In addition, stock splits can also make it easier for Nvidia to join the Dow Jones Index and consolidate its position in the US capital market.

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All of these layouts are made by Huang Renxun to prepare NVIDIA to become the number one player in the global capital markets.

Challenge

Looking at the current situation, NVIDIA is undoubtedly a sought-after gem. In the past five years, NVIDIA's stock price has risen nearly 30 times, and it has soared more than 150% this year.

The story of the elephant dancing has been seen in various places in the US stock market. From 1992, when Huang Renxun and other founders had the idea of creating NVIDIA in a chain restaurant in Silicon Valley, to becoming a giant today, NVIDIA has hovered on the verge of bankruptcy several times.

Investment banks are also worried whether the AI bubble is nearing a critical point and whether NVIDIA may repeat the "Cisco moment".

As the "arms dealer" of the previous Internet revolution, after the Internet bubble burst, Cisco's market value evaporated by about 90% in the following years and has never returned to its peak.

The market is constantly changing, and semiconductors are also an industry with extremely strong cyclicity. Whether it's cryptos or the gaming trend during the epidemic, Nvidia has experienced significant fluctuations in revenue and profits under short-term demand surges.

At present, NVIDIA is in a state of continuously hitting record high revenue and profit margins, and its products are in short supply and easy to sell.

However, the existence of cycles implies that if NVIDIA wants to continue to break records, both sales and profit margins must maintain a strong momentum, while building a high city wall to protect itself. On the way to the top, NVIDIA is facing a series of problems, such as industry trends, attacks from competitors, and resource bottlenecks.

At the current node, NVIDIA accounts for more than 70% of the market share of AI training chips, and its data center GPU market share is overwhelmingly 92%. It is difficult for competitors not to be envious of this big AI cake.

AMD CEO Dr. Su expressed unreservedly that it seems that NVIDIA's dominance does not meet the will of the industry. "I don’t believe NVIDIA’s moat theory. It is important whether customers have a choice, and they actually hope to have more hardware products to try."

Soon, in early June, AMD launched the new MI350X AI accelerator chip, which has multiple times the memory, bandwidth, and computing performance compared to NVIDIA's strongest AI chip H200, and like NVIDIA, AMD also said it will release a new product every year. Intel also revealed that its Gaudi 3 AI chip will be priced well below its competitors and plans to launch it on a large scale in the third quarter of this year. According to the official positioning, the performance of this chip is 1.5 times that of NVIDIA H100 and is equivalent to H200.

Not only that, major NVIDIA customers such as Microsoft, Amazon, Google, and Meta, who have no better alternatives, have also begun to "make their own military", design AI chips, and entrust manufacturers to produce them in an attempt to get rid of their dependence on "Master Huang".

More importantly, after the battle of scaling up AI models, whether it is technology giants or AI startups, they have entered a calm period of searching for landing scenarios for large models.

In March, Sequoia Capital estimated that AI startups sent $50 billion to NVIDIA to train large language models, but they only received a meager $3 billion in revenue from the market.

In other words, in this grand "arms race", players must rethink the real issue of achieving profitability. If commercialization is slow to come, NVIDIA is afraid that it will not be able to escape the cycle of the industry.

Standing at the peak of the industry and being swayed by trends, Huang Renxun has no way out. He must fight to defend the AI infrastructure and wait for the industry average to return and high-profit margins to recede. He must still be able to stand out from the crowd.

Editor / ruby