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NVIDIA Enjoying the Spoils of 2023’s AI-Obsession

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For the past few years, the most exciting and potential-laden technology has, arguably, been blockchain.  Whether this be the tokenization of real-world assets, establishing a global currency through Bitcoin, or expanding on the capabilities of what smart contracts can achieve, the benefits afforded by blockchain remain tantalizing.  Despite this, in 2023, the sheen has worn off of the sector as it continues to mature.  Now, investors and technology enthusiasts alike have redirected much of their attention toward the next big thing – Artificial Intelligence (AI).

Undoubtedly, the company most commonly associated with artificial intelligence is OpenAI and its flagship product ‘ChatGPT'.  Interestingly though, despite ChatGPT boasting in excess of 100 million users, OpenAI is not the biggest benefactor from this boom in excitement around the technology.  Rather, it would appear to be graphic card manufacturer NVIDIA.

NVIDIA Corporation (NASDAQ: NVDA)

NVIDIA is a leading technology company that is well-known for specializing in the design of graphics processing units (GPUs) for a variety of industries (e.g., gaming and professional markets, and system-on-a-chip units (SoCs) in both mobile and automotive applications).  Notably, the company is also playing a critical role in the development of AI, as its GPUs provide the high-performance computing power necessary for training complex neural networks, making it one of the more interesting publicly traded stocks to follow in 2023.

NVIDIA HGX H100 | The most powerful end-to-end AI supercomputing platform

Market Cap: $1.14T

Price to Earnings Ratio (P/E): 236.82

Earnings Per Share (EPS): $1.92

At the time of writing, NVIDIA (NVDA) boasted the above metrics and is listed as a ‘Strong Buy' among most major investment firms.

How is NVIDIA Benefitting?

For OpenAI and similar companies to thrive and grow, a massive amount of processing power is required to scrape, analyze, and present data in an intelligent manner.  It is NVIDIA that is leading the charge in meeting these processing needs.  While exact numbers are unknown, the ‘brain' behind OpenAI was said to be comprised of more than 20,000 A100 GPUs upon launch that were each acquired from NVIDIA.  In the time since, NVIDIA's AI-specific solutions, like the CUDA platform and Tensor Cores, have become standard tools for AI researchers and developers.  Needless to say, NVIDIA has greatly benefited from this boom in AI.  Furthermore, as demand for AI and machine learning increases across industries (e.g., healthcare, finance, autonomous vehicles, etc.) the need for NVIDIA products should only continue to grow.

Source: nasdaq.com/market-activity/stocks/nvda/advanced-charting

This demand for GPUs has allowed for stock in NVIDIA to increase from ~$145 at the beginning of 2023, to an impressive ~$457 a mere 7 months later.  As Bloomberg notes, this demand has resulted in NVIDIA now joining the ‘$1 Trillion Club', with regards to its overall market cap.  It should be noted that while this run-up in price is impressive, it may be unrealistic to expect continued returns of such proportion, as the initial fervor surrounding AI within the general public has potentially already peaked.  To this end, Google searches for AI have plummeted 40% since peaking in April 2023.

Despite a drop in interest from the general public, it is widely expected that until the next game-changing technology comes along, AI will continue to be a sought-after destination for investing capital.  Beyond NVIDIA, an increasing amount of companies have come to this conclusion, resulting in examples like HIVE Blockchain rebranding to Hive Digital Technologies in a move that will see it repurpose its existing fleet of proof-of-work miners to function as an AI-cloud service from companies in need of processing power to train AI tools.

No Luck Needed

Notably, NVIDIA fueling and profiting on the growth of AI is/was not a matter of luck.  As Bloomberg reports, the company's interest in the industry dates back to at least 2016 – well before the mainstream AI boom.

This foresight was not relegated solely to the development of GPUs – such as the Titan X, Volta, Turing, Ampere, etcetera.  Over this time, it has extended to include the development of,

  • AI platforms for use in autonomous vehicles
  • Research and development efforts
  • Cloud computing services
  • Software and SDKs

Clearly, NVIDIA wasn't just ‘in the right place at the right time' as it began to benefit from the 2023 AI boom.  Rather, the company has been making a concerted effort for years now to manifest the current situation in which its products are in high, and increasing, demand.

Welcoming Arms

With AI set to be quite lucrative for NVIDIA, it would seem obvious that the company would embrace the industry with welcoming arms.  Interestingly, this was not the case with blockchain, despite fueling massive, unprecedented demand over multiple years for the company's products.

In fact, in the past, NVIDIA has gone so far as to try and dissuade crypto-miners from using its products by introducing ‘hash rate limiters' to various of its flagship products.  These limiters were meant to intelligently detect when a user was leveraging a GPU for mining purposes, such as those in the RTX 30 series, and restrict the amount of processing power available.  To this day, if you visit the NVIDIA website, you will see the company promoting the use of its GPUs across an array of industries including gaming, automotive, AI and data science, robotics, and more – blockchain is the only popular, relatively nascent, technology excluded.

With that being said, the reliance upon NVIDIA GPUs in PoW mining is quickly diminishing as networks like Bitcoin now rely on ASIC devices instead, and many others transition to Proof-of-Stake (PoS).

Final Word

Even if NVDA can not keep up the pace at which it is rising in value, it is hard to see a future in which it doesn't continue to increase, as demand for NVIDIA products is set to only grow.  Over the years, NVIDIA established itself as a fixture in the technology sector by servicing not only the gaming industry, but the automotive, mobile, and – begrudgingly – the blockchain sector.  AI should only serve to solidify its standing in the ‘$1 trillion club'.

Joshua Stoner is a multi-faceted working professional. He has a great interest in the revolutionary 'blockchain' technology.