For fear of missing out on the boom, billions are being invested in Nvidia superchips and “AI companies.” No one knows whether these enormous investments will ever pay off.
It’s a bad feeling: the party is in full swing and you’re not there. Not having to experience this feeling again is currently a concern of many decision-makers. Fearful of missing out on what is supposed to be the “next big thing,” they are pouring enormous amounts of money into technology and companies that have “something to do with AI.” Nowadays, every company that doesn’t want to appear outdated has an “AI strategy” or seeks advice from “AI experts”.
Nobody knows where the journey is headed. But company leaders and investors agree with Nvidia boss Jensen Huang: “The next industrial revolution has begun.” This revolution has only been going on for 18 months and only really gained momentum with the launch of Chat-GPT. But for many it is already a certainty: it is a paradigm shift, there is no alternative to mastering AI. Artificial intelligence will fundamentally change the economy and everyday life, that is the mainstream opinion today.
Billion lost funds
The American tech giants are the most decisive in putting this belief into practice: Amazon, Microsoft, Google and Meta invest tens of billions of dollars every month in expanding their data centers so that they are powerful enough to offer AI services off the assembly line. But even the American giants don’t know whether and when their billions in spending will pay off. None of the numerous AI startups have so far presented a business model for how the enormous hardware investments can be recouped.
But that doesn’t matter. “AI” is currently legitimizing every billion. So far, one company in particular has benefited from this blind investment frenzy: Nvidia. The graphics chip provider, which was only known to insiders two years ago, has exactly the right technology on offer. Nvidia’s superprocessors are perfect for delivering the high computing power required for AI applications. It is no feat that the company, founded in 1993 by Jensen Huang, has captured an 80 percent market share for AI chips within a very short period of time. Nvidia was in the right place at the right time with the right product.
Just as important: Huang is a master at telling the AI fairy tale the way customers and investors want to hear it. Nvidia recently delivered the perfectly staged, expected surprise: for the third quarter in a row, Huang presented a tripling of sales, and those with AI chips for data centers increased fivefold. The bottom line is a profit explosion of almost $15 billion. According to Huang, demand continues to far exceed supply, “well into next year.”
Relief for careless investors
This is a relief for investors in particular. With such a set of figures behind them, they can continue to ride the Nvidia wave with a clear conscience. The magical multiplication of money with the most important share in the world will continue until further notice. Careless investors can safely ignore risk factors such as persistent inflation, looming interest rate increases and the escalating trade dispute – as long as things are going well for Nvidia, things are going well on the stock markets too.
Because you can make a lot of money with Nvidia shares. Since Chat-GPT was launched at the end of November 2022, they have been worth six times more. On Thursday, tech stocks broke the magic $1,000 mark. Only Microsoft and Apple are more valuable than Nvidia. Not only investors, but above all Nvidia’s customers have an enormous interest in the AI fairy tale continuing so that their investments in Nvidia pay off at some point.
As long as Jensen Huang and his company are likely to continue to benefit from the promise of artificial intelligence. But it is uncertain whether Nvidia will still be one of the winners of the revolution in ten years. After all, Intel also had a monopoly-like position in microprocessors in the early days of PCs and laptops. Today, Intel only plays a minor role in the race for the best AI technology and is considered to have been left behind. So Nvidia has to ride the wave while it lasts.