Title: Nvidia’s Stock Booms Amidst Increasing AI Developments
As rapid advancements in artificial intelligence continue to shape various industries, only a few companies like Nvidia are projected to emerge as winners. Silicon Valley-based Nvidia is a chipmaker, whose AI technology powers various applications like ChatGPT. They recently became the first-ever chipmaker to achieve a $1 trillion valuation, leading investors to rush into companies that are considered the biggest beneficiaries of AI developments. While various companies stand to benefit from the high demand for chips, software, and IT services companies could end on the losing end of AI automation.
Winners and Losers in the AI Revolution
According to Rajiv Jain, founder and chief investment officer of GQG Partners, the rapid rise of AI will create more losers than winners. As several tech firms seek to benefit from the high demand for chips, some are likely to lose as AI automates part of their operations. Jain advised that Nvidia is among the apparent winners of the revolution. Other big tech companies like Meta and Alphabet are right behind Nvidia in benefiting from the advances of AI.
Jain mentions how AI is disrupting business models across various industries, meaning that some businesses are likely to fall behind and lose out. He goes on to say that predicting who will be the winner in the AI revolution is challenging except for a few companies. Many tech startups emerged during the dotcom boom, but only a few emerged as winners. Jain previously bought $2.3 billion worth of Nvidia stocks in the first quarter and continues to have a considerable stake in the company.
Nvidia Continues to Grow
Nvidia’s shares continue to soar, with a massive 170% increase this year, adding $575 billion to their market cap. This number is only surpassed by Apple and Microsoft, who added $721 billion and $654 billion, respectively. The S&P 500 is also up 9%, extending a recovery that started in October. Jain and his team of experts say that Nvidia stands a good chance of winning big in the AI revolution because they have a head start and are increasingly pivoting to AI applications.
Nvidia’s AI Innovation
Nvidia’s AI chips, like ChatGPT, have created a surge in demand. ChatGPT is a chatbot that Jain says will result in an “earnings boost feature” for Nvidia. Group CEO Jensen Huang describes their chips as the world’s first computer chips designed for generative AI. This means they can create human-like text, images, and content at a rapid pace. Nvidia’s sales forecasts beat Wall Street’s expectations by more than 50%, strengthening the company’s position.
The Quality Growth Within the Tech Sector
Jain pointed out that there is a divergence within the technology sector, with profitable tech companies separating from the loss-making ones and being pushed higher during the last leg of the market bullish. “The quality growth within the technology side is back in the picture,” says Jain, highlighting how only a few companies stand to gain from AI’s advancements.
Supply Chain Bottlenecks and Nvidia’s Challenges
Despite such optimism, Nvidia faces some challenges that could hurt its performance. Jain notes that meeting the demand for chip products is a significant challenge. Companies continually lose earnings because they can’t meet the demand, and Jain sees this as the main issue Nvidia is facing at the moment. Nvidia employs several measures to increase supply and efficiency, including partnering with external foundries and investing in its manufacturing plant.
Nvidia’s Success is Built on Innovation
Nvidia’s success is built on innovation, a strategy that Jain understands well. He knows that the company must continue to innovate to stay ahead of the competition and continue to grow. Jain launched Florida-based GQG seven years ago, and inflows of $5 billion in the first quarter helped make his assets reach about $100 billion for the first time. GQG’s success with Adani Group’s investment shows that the company is actively seeking ways to leverage AI’s potential. The investment comes after a US short-seller attack on the Adani Group wiped off $145 billion from its market value.
Summary
Nvidia’s stock continues to soar as the company continues to pivot towards AI applications. As more industries adopt AI, the demand for Ai hardware and software is increasing, and Nvidia stands to benefit significantly. Other significant companies like Meta and Alphabet are also likely to benefit from the AI revolution as they increase their investment in the technology. Jain warns that while some companies may benefit from the AI revolution, many others stand to lose. Nvidia faces some challenges, including meeting the demand for chip products. However, the company continues to innovate, and Jain believes Nvidia stands a better chance of emerging as a winner of the AI revolution.
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Nvidia is one of a handful of companies that will buoy this year’s rebound in US stocks even as rapid advances in AI “create more losers than winners,” according to one of the major recent buyers of the US chipmaker’s stock.
Silicon Valley-based Nvidia, whose technology powers AI applications including ChatGPT, last week became the first chipmaker to achieve a Valuation of $1 trillion while investors have rushed into companies that are seen as the biggest beneficiaries of developments in AI.
“In the context of Nvidia, it [AI] it’s going to create some winners and losers. . . more losers than winners” as it disrupts business models across industries, said Rajiv Jain, founder and chief investment officer of GQG Partners.
“The obvious winners at this point, other than Nvidia, are going to be the bigger tech names, whether it’s Alphabet or Meta or those kinds of names,” he added. GQG Partners bought $2.3 billion of Nvidia stock in the first quarter and has since increased its stake.
Nvidia’s shares are up 170% this year, adding $575 billion to the group’s market cap, a gain that only surpasses the $721 billion and $654 billion put in by Apple and Microsoft, respectively.
The S&P 500 is up 9% this year, extending a recovery that began in October.
Jain said that while many semiconductor companies are likely to benefit from high barriers to entry and strong demand for their chips, some software and IT services companies could end up “on the losing side” as AI automates parts of their activities and “a lot of the basic stuff that’s going to be done is going to be redundant”.
But, just like in the dotcom boom, he warned that “it is difficult to predict who will be the winner here, except for a very few. . . no one could have predicted that Amazon would be the winner, unless you were betting on Jeff Bezos. It’s easy to say I did it, but there were hundreds of startups in e-commerce, who knew? And not to mention the company itself which has radically transformed itself over the years.”
Jain launched Florida-based GQG seven years ago. Inflows of $5 billion in the first quarter helped push his assets to about $100 billion for the first time.
The firm was placed in the spotlight this year, when it invested $1.9 billion in Indian conglomerate Adani Group after it was hit by a US short-seller attack that wiped off as much as $145 billion from its market value. He has since increased his stake in Adani Group companies.
The “trigger” for rebuilding his stake in Nvidia was the arrival of the AI chatbot ChatGPT, which Jain says will herald an “earnings boost feature” for Nvidia. GQG first bought Nvidia in 2017, but sold out 18 months ago due to concerns about its high valuation.
The launch last November of ChatGPT has created a surge in demand for Nvidia H100 chipswhich group CEO Jensen Huang described as “the world’s first computer [chip] designed for generative AI”: artificial intelligence systems capable of rapidly creating human-like text, images and content.
Last month, Nvidia provided sales forecasts that beat Wall Street’s expectations by more than 50%.
Jain pointed to a divergence within the tech sector, where big profitable tech companies – which make up large swathes of stock indices – are separating from loss-making ones and were pushed higher during the last leg of a market bullish fueled by pandemic stimulus.
“There were a lot of delusional thoughts in 2021, now there are less delusional ones,” she said. “The quality growth within the technology side is back in the picture.”
The main obstacle for Nvidia is whether it can meet demand, Jain said. “Companies continually lose earnings because they can’t meet demand,” he said. “I think that’s the biggest problem Nvidia is facing at this point.”
https://www.ft.com/content/416361f3-aafd-4b89-95cd-aa29406a7527
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