Huang’s video game chips have proven to be a fortunate fit for AI, but his supporters reject the notion that he stumbled upon success. According to a former Nvidia executive, Huang was one of the early pioneers who actively studied and invested in AI. He listened to the industry, experimented, and worked to improve the GPUs’ capabilities for AI applications. Around 2018, Huang made the significant decision to bet big on AI.
In today’s market, Nvidia faces competition from chipmaking giants AMD and Intel. However, Nvidia has secured a tremendous head start and is now closely associated with AI itself.
During Wednesday’s announcement of the company’s results, it became clear that Nvidia’s sales surge was not a one-off event but part of a sustained growth in investment. Huang stated that there is now a “tipping point” where companies are increasingly diverting their investments toward AI technology. He declared, “A new computing era has begun. Our demand is tremendous.”
Despite these positive developments, some are skeptical of Huang’s claims. Web traffic analysis reveals a 10% decrease in visitors to OpenAI’s ChatGPT site in June. Additionally, companies such as Meta are promoting AI algorithms that require less computing power, challenging the dominance of Nvidia’s chips in the AI market.
Moreover, there are concerns about the sustainability of Nvidia’s soaring share price. AXS Investments, for instance, has launched a fund dedicated to short positions against Nvidia, anticipating a decline in its stock. These investors have committed $100m to the fund.
Furthermore, the high demand for Nvidia’s processors in China may face obstacles due to US sanctions. The White House has already prohibited the sale of some of Nvidia’s most powerful AI chips to Beijing and may impose additional restrictions.
Greg Bassuk, CEO of AXS Investments, explains that Nvidia’s valuation is under scrutiny among investors who are worried about geopolitical influences on the company’s growth prospects. They are now assessing whether Nvidia’s rapid growth in AI can be sustained.
Despite concerns, short-sellers who bet against Nvidia’s share price have suffered significant losses this year, amounting to over $11bn, as reported by analysts S3 Partners. “Nvidia’s hardware has become indispensable to the AI-driven economy,” remarks Jacob Bourne, an analyst at Insider Intelligence. The company’s performance highlights its essential role in the current narrative of economic growth, which relies on the belief that AI will enhance productivity and unlock trillions in economic value.
If Nvidia can capture even a fraction of these trillions, there will be no stopping its success.
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