Few technologies have drawn market attention as well as artificial intelligence (AI) in recent years. However, this does not surprise, given the enormity of the potential power of technology – at least according to its ambassadors. The Sam Altmans (CEO of Openai) and Dario Amodeis (CEO of Anthropic) of the world see a not too distant future in which their products transform our economy and Fundamentally the way most companies do business.
But have you ever met a CEO of Tech which doesn’t claim that their business is changing the world? It is a good thing that the optimism of AI extends far beyond the Cisses C of the Silicon Valley. Investors can comfort themselves in the fact that organizations of the International Monetary Fund for the United Nations clearly indicated that they believed that AI will have a massive impact.
NVIDIA rides the Ai wave
The not so secret sauce fueling this AI revolution is the ultra-powerful tokens that technology requires. When you ask Chatgpt How To Make the best roast chicken (index: Mix a little baking powder and salt to obtain this crisp additional skin), a hive of graphic treatment units (GPU) favors a lot-The data center for football fields somewhere in rural America. I’m not kidding: Meta-platforms In built one in Louisiana, on which you could pose 70 football fields. As you can imagine, to fill such an area, companies must buy a lot of GPU.
Without a doubt, No company has a grip on the GPU market of AI as Nvidia (Nvda 1.63%)) And it was very rewarded for this. Placed almost entirely by the sale of these chips, the company has seen its income soar since 2023. Discover the graph showing the growth of sales compared to Meta (a major client), Advanced micro-apparents (a manufacturer of rival fleas), and Alphabet (which is based on the AI to improve its Google search engine, as well as on products such as Waymo, Nest and Youtube).
NVDA Revenue (TTM) data by Ycharts
Its growth has been monumental. During the same period, Nvidia has also widely widened its margins while continuing to innovate to stay ahead of the competition. The fact is that no business could not touch it when it comes to producing the best chips. And with the ability to considerably overcome rivals in research and development (R&D) and the ability to attract and keep the best talents, it seems unlikely that it will change anytime soon.
Cuda is the key
Although a lot of attention is given to the advantage of Nvidia in raw power, its most important and lasting advantage is perhaps in its Cuda platform. Consider Cuda as a kind of language that allows programmers to use GPUs for purposes other than the rendering of graphics (for which they were originally created).
Cuda is the software foundation on which the complex scaffolding of AI is built. The platforms and higher order development tools that almost all AI developers use are made to work with Cuda.
This means that if a customer wanted to switch to the chips of a rival, he should invest huge times and money to transform all of their workflows and workforce – either by recycling or firing and hiring new developers. Although this is not impossible, the cost makes it a non-start for the most part. Cuda keeps Nvidia customers locked in his ecosystem, willing to pay a bonus.
This is not an easy way to follow
Despite the domination of Nvidia, there are still a lot of challenges that await us. I do not see any major obstacle in the near future that Nvidia cannot easily erase. All the panels indicate that the company is continuing its successful sales over the next year. Its main Big Tech customers have all committed to registering capital expenditure amounts focused on AI, a large part of which is assigned to the expansion of the data center.
In the longer term, however, some major questions stand out. First, the AI will have to start providing yields that can justify the vast sums spent on its development. The promise and potential only bring you so far. The shareholders of the alphabet, the meta and their fellow men will become more and more uncomfortable with the series of expenses if a proportional yield is not specified. If this does not start to happen in the next two years, I could see the money slow down.
Second, while Nvidia is likely to maintain its advantage in the foreseeable future, technology is an industry defined by the disturbance. A flea company arriving using new radical technologies could break out on the stage. Or, perhaps in a less dramatic way, its main customers develop their own tokens and make the change despite the cuda pits from which I discussed.
Finally, The success of Nvidia has become one of its greatest challenges – At least for its stock market course. The company published another report on the results of monsters last month, offering growth of almost 80% of one year over the other, but NVIDIA shares have dropped by 21% in the last six weeks. There are macro -factors that do not help, but the fact remains that the market is currently awaiting the perfection of the company, and perfection does not exist – unless you ask my fifth year violin teacher; So this is the case, and I just am not capable of it.
However, there are few companies with the vision that Nvidia has demonstrated. Nvidia will be able to adapt to the challenges that await us. This will in no case be all roses, but I also think that over time, the expectations of perfection will disappear and that the results of Nvidia will continue to grow considerably. And considering that after the recent drop in action, its price / benefit ratio (P / E) has now been the lowest in many years – well before taking off the enthusiasm of the AI - I think Nvidia makes an intelligent investment.
Suzanne Frey, director of Alphabet, is a member of the board of directors of Motley Fool’s. Randi Zuckerberg, former Director of Development of the Facebook and Sister of the CEO of Meta Platforms, Mark Zuckerberg, is a member of the board of directors of Motley Fool’s. Johnny Rice Has no position in the actions mentioned. The Motley Fool has positions and recommends micro advanced devices, alphabet, meta platforms and Nvidia. The Word’s madman has a Disclosure policy.