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Tag: Nvidia GPUs

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AI Stocks

CES Note On Nvidia (NVDA)

Nvidia Digits Linux Blackwell Desktop

Nvidia Announcements: Jensen Huang CEO delivered the CES (Consumer Electronic Show) keynote on January 6th, 2025. An immensely popular event, with about 140,000 attendees, the charismatic Jensen drew a packed crowd. Jensen did not disappoint.

New Gaming Cards: Nvidia’s new line of RTX 50 Series gaming graphics cards is based on the company’s Blackwell chip architecture. Considering the massive leap Blackwell has made over Hopper, its previous iteration in data center applications, getting it to work in gaming is a huge deal – a massive improvement with superior rendering and higher frame rates for gamers.

Digits – The Linux-based desktop computer with the GB 10 Grace Blackwell Superchip with a CPU and GPU. A first in its history at $3,000 “Placing an AI supercomputer on the desks of every data scientist, AI researcher, and student empowers them to engage and shape the age of AI,” Huang said.

It may seem like a niche product for high-end engineers/professors/scientists and researchers, but I think it’s a deliberate and excellent strategy to evangelize the product, through the folks who can develop use cases and apps that can further the market for cheaper at scale mass Digits in the future. 

This is straight from the Nvidia playbook from the last two decades – they have always involved the scientific and research community from the start. I can bet a large number of these are going to be distributed free to campuses.

I think Digits will turn out to be a very consequential product for Nvidia – with several billion in revenue in a few years. But forecasts aside, what’s key is that Digits uses a scaled-down version of Nvidia’s Grace AI server CPU technology. It’s packaged in a Mac Mini-sized form factor with the help of Taiwan-based MediaTek, which Huang commended for its expertise in building low-power chips. 

Quoting Tae Kim from Barron’s who authored an excellent book on Nvidia.

“Over time, the logical move for Nvidia would be to scale down this CPU further for consumer Windows laptops. By integrating its graphics expertise, MediaTek’s power-saving capabilities, and the efficiency of Arm-based CPU technology, Nvidia could create a processor that offers leading graphics for gaming and high performance for productivity, along with long battery life. While prior Arm-based Windows PCs have struggled with software compatibility, Nvidia’s top-notch software engineering could make it work.”

Huang strongly hinted it was likely to happen. “We architected a high-performance CPU with [MediaTek],” he said on Tuesday at a question-and-answer session with financial analysts at CES. “It was a great win-win.”

When pressed by an analyst if Digits was an iterative step toward moving into the PC market, “I’m going to have to wait to tell you that,” Huang said. “Obviously, we have plans.”

There are questions about why Nvidia chose Linux over Windows – and we should hear more about that at their GTC conference in March.

It could shake up the moribund PC market, which has been suffering from a lack of growth rates after COVID-19. Desktop PCs and laptop computers still generate large revenues for Intel and Advanced Micro Devices, the primary makers of x86-based processors – a legacy that could give way to ARM-based processors, which Apple uses. Analysts expect Intel to generate $30 billion in revenue from its client computing business in 2024, according to FactSet, while AMD has $6.7 billion in revenue in its client segment.

Billions of potential new revenue are at stake for Nvidia, which is forecasted to make $180Bn in sales in the 12 months ending January 2026. While data center takes up the largest share of revenue at about $150Bn of that pie and gaming, auto, and professional visualization (Omniverse) take the rest, a new source would help a great deal when data center revenue growth slows down.

In the past two years, Nvidia has monopolizedized the AI data center market with the best-designed, highest-performing chips. Nvidia would likely make a significant dent in the PC market as well as the new paradigm in edge computing with all the computing power and constant innovation and upgrade at its disposal.

The third announcement was for COSMOS – a significant improvement over their Omniverse and the biggest catalyst/enabler of “Physical AI”,  I’ll write a separate note on that.

Nvidia wants it all. That’s likely to be good news for consumers and trouble for the PC status quo.

Categories
AI Cloud Service Providers Semiconductors Stocks

Nvidia Is An Excellent Long Term Investment

source:nvdia

Hyperscaler Capex Shows Strong Demand For Nvidia’s (NVDA) GPUs.

I know there is excitement in the markets as Nvidia reports Q3-FY2025 earnings after the market on Wednesday 11/20. Nvidia earnings watch parties have become part of the Zeitgeist, and its quarterly earnings are one of the most closely watched events each quarter.

I, however, don’t believe in quarterly gyrations and have been a long-term investor in Nvidia since 2017, having recommended it more than two years ago and then in March 2023 and again in May 2023 as part of an industry article on auto-tech.

I believe the Blackwell ramp is going strong, and reports regarding rack heating issues are just noise in a program of this size.

Capex from hyperscalers will continue to fuel demand for Nvidia’s GPUs in the next year and beyond and even though it’s expensive it remains a great long-term investment.

Capex from hyperscalers – Nvidia’s biggest customers.

AI spending from the hyperscalers is expected to increase to $225Bn in 2024. Cumulatively in the first 9 months of the year, the key hyperscalers who are Nvidia’s biggest clients, have already spent $170Bn, on Capex — 56% higher than the previous year. Here are the estimates for the full year 2024, 

  1. Amazon (AMZN) $75Bn 
  2. Alphabet (GOOG) $50Bn
  3. Meta (META) $38Bn to $40Bn
  4. Microsoft (MSFT) $60Bn

On their earnings call, hyperscalers’ management committed to continued Capex spending in 2025, but not at the same pace of over 50% seen in 2024.

When quizzed by analysts, hyperscalers also talked about AI revenues, which though are still relatively small compared to the amount of Capex spent, it is growing and growing within their products. Amazon mentioned that its AI business through AWS is at a multibillion-dollar revenue run rate growing in triple-digits year, while Microsoft’s CEO stated that its AI business is on track to surpass $10 billion in annual revenue run rate in Q2-FY2025. 

Meta and Alphabet had more indirect inferences about AI revenues. For example, Meta believes that its AI tools improve conversion rates for its advertisers, which creates more demand. On the consumer side, Meta believes that their AI has led to more time spent on Facebook and Instagram. Similarly, Alphabet also spoke about Gemini improving the user experience and its use of AI in search. Seven of the company’s major products—with more than two billion users—have incorporated Google’s AI Gemini model, While Capex from hyperscalers also goes towards infrastructure, and building, which take longer to show good returns, a fairly large chunk goes towards GPUs, which bodes well for Nvidia, which controls more than 80% of the AI-GPU market.

Besides Capex, I also believe in AI and there are several areas where AI has already shown promise.

Code Generation

The low-hanging fruit is being plucked: A quarter of new code at companies like Google is now initially generated by AI and then reviewed by staff. Similarly, GitLabs and GitHub, are providing Dev-Op teams similar offerings.

Parsing and synthesizing data for product usage:

Partha Ranganathan, a technical fellow at Google Cloud, says he’s seeing more customers using AI to synthesize and analyze a large amount of complex data using a conversational interface.

Other enterprise software companies see huge upsides in selecting a large-language model and fine-tuning the model with their own unique data applied to their own product needs.

I recommended Duolingo (DUOL) for the same reasons, their own AI strengths better their language app, creating a virtuous flywheel of data generation from their own users to create an even better product – data that exists within Duolingo, which is more powerful and useful than a generic ChatGPT product.

Using AI for medical breakthroughs

Pharmaceutical giants like Bristol Myers are using AI for drug discovery at a pace that was impossible before AI and LLMs became available. These are computational problems that need powerful GPUs to research, compute, and process for clinical trials.

Who is the indispensable, ubiquitous, and default option to turn their dreams into reality? – Nvidia and its revolutionary Blackwell GPUs – the GB200 NVL72 AI system, which incorporates 72 GPUs, linked together inside one server rack differentiating Nvidia from its lesser lights like AMD and Broadcom, which at a run rate of $5.5Bn and $11Bn, respectively are minnows compared to the $130Bn behemoth with 80% of that revenue from AI/Datacenter GPUs.

I believe we are in the first innings of AI and Nvidia will continue to lead the way. I continue to buy Nvidia on declines.

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Market Outlook

Great Expectations: Tech Giants’ Solid Earnings Can’t Satisfy High Hopes

Great Expectations. Hi everyone. Sometimes, stocks get ahead of themselves.

Late Tuesday, three of the biggest names in technology—Alphabet, Microsoft, and Advanced Micro Devices—reported December quarter results and offered the latest updates on their AI progress.

While the headline numbers were generally solid, they weren’t good enough to impress investors given the stocks’ big runs.

Microsoft had the best quarter of the bunch, reporting earnings per share of $2.93, well ahead of the analyst consensus of $2.76. Alphabet beat profit estimates, posting EPS of $1.64 versus the consensus of $1.59. AMD’s profit was in line with the estimates, but the company’s revenue outlook was disappointing.

All three stocks were down in mid-day trading Wednesday. Alphabet shares dropped 6%, AMD slipped 3%, and Microsoft was down 1.4%. The tech-heavy Nasdaq Composite was off 1.6%.

The main problem with the reports wasn’t the numbers but the expectations going in. Take AMD’s AI chip outlook. On last night’s conference call with investors, CEO Lisa Su said that AMD now expects revenue for its AI data center MI300 GPU products to surpass $3.5 billion in 2024—up from a $2 billion forecast just three months ago. While the guidance is up significantly, some Wall Street analysts had estimates of up to $8 billion.

Investors would be wise to largely overlook these day-to-day stock movements. The technology companies’ conviction over future AI demand is more important. And, given the latest commentary about capital expenditure budgets, the robust trend is intact.

Microsoft said its expects capex to “increase materially” in the current quarter, and it intends to invest aggressively in the coming quarters. Alphabet said its capex would be “notably larger” in 2024 versus the prior year. Both companies said infrastructure investments are being driven by trends in AI demand.

There’s other evidence the AI arms race is still on beyond the comments from Microsoft and Alphabet. On Monday, Super Micro—a leading independent manufacturer of high-end AI servers for data centers— easily beat expectations and raised its full-year revenue guidance by nearly 40%. Last week, Nvidia CEO Jensen Huang told reporters in Taiwan that demand for AI GPUs is still outstripping supply, while adding 2024 is going to be a “huge year.”

Finally, Meta CEO Mark Zuckerberg boasted on social media earlier this month that his company will have 350,000 Nvidia H100 GPUs—and almost 600,000 H100 equivalent GPUs based on total computing power—by the end of this year.

We’ll find out more when Meta, Amazon, and Apple report on Thursday, but all signs suggest that AI spending is still accelerating—no matter what stocks said on Wednesday.