On Wall Street, what are the dangers of being a skeptic when everyone is ***? Take a look at what happened to Rob Arnott. Five months ago, he "wisely" pointed out that Nvidia's ** (nvidia corphas become a bubble.
The esteemed founder of Research Affiliates called it a "textbook big market illusion," citing the fact that the company's share price had quadrupled in just one year and its valuation had reached extreme levels. However, this "bubble" has expanded by about $800 billion since he warned last September, and the biggest risk at the moment is to be left behind by it.
Never short bubbles when they're in full swing, but that doesn't mean you have to own them. Arnault said this week.
His words may or may not be right. But in any case, his views have been ignored by most of Wall Street. After the world's most valuable chipmaker released a blowout report last Wednesday and shattered expectations, this AI feast is one that no one can afford to miss: among the tech giants, there are almost no bears. Analysts' price targets are soaring. From hedging to hedging, it is becoming more and more aggressive.
Is this a crazy gamble, or is it a sound investment? How long can Nvidia's ** blow up? This article will analyze the following aspects:
Nvidia's performance and valuation
NVIDIA's competitive advantages and risks
NVIDIA's market prospects and potential
NVIDIA's investment strategy and recommendations
Nvidia's performance and valuation
NVIDIA is a professional designer and manufacturer of graphics processing unit (GPU) and artificial intelligence (AI) chips, and its products are widely used in gaming, data center, automotive, medical, education and other fields. The company achieved record results in the fourth quarter of 2023, with revenue of $5 billion, up 61% year-over-year; Net income reached $1.9 billion, up 53% year-over-year. Among them, the revenue of the data center business reached 1.9 billion US dollars, an increase of 97% year-on-year, accounting for 38% of the total revenue; Gaming revenue reached $2.5 billion, up 67% year-over-year and accounting for 50% of total revenue.
Nvidia's performance exceeded market expectations and also reflected the company's leadership and strong demand in GPU and AI fields. "Our performance reflects our ability to innovate and execute in areas such as gaming, data center, edge computing and autonomous driving," said Huang, the company's chief executive officer. Our AI platform is providing powerful acceleration capabilities for cloud computing, 5G networks, the Internet of Things, and autonomous driving, and our gaming platform is providing the best gaming experience for hundreds of millions of players around the world. ”
Nvidia's stock price has also risen with soaring performance, from about $500 in September 2023 to about $800 in February 2024, with a market value of nearly $500 billion, surpassing Intel and Tesla to become the world's most valuable chip company. Nvidia's share price has risen by nearly 300% in the past year and nearly 2,000% in the last five years.
However, Nvidia's rapid growth has also brought with it a high valuation. According to Yahoo Finance, Nvidia's price-to-earnings (PE) ratio is 90 times, price-to-sales ratio (PS) is 25 times, and price-to-book ratio (PB) is 25 times, which is much higher than the industry average. For example, Intel's PE is 12x, PS is 3x, and PB is 3x;AMD has a PE of 40x, PS of 10x, and PB of 18x. This means that investors have very high expectations for NVIDIA's future profitability and growth potential, as well as very high risks.
NVIDIA's competitive advantages and risks
The reason why NVIDIA has achieved such excellent results in the field of GPU and AI is mainly due to its competitive advantages in technological innovation, product quality, market share and ecosystem. Here are some of the advantages of NVIDIA:
Technological innovation: NVIDIA has strong R&D capabilities and patented technologies in the field of GPU and AI, and has continuously launched a new generation of products and solutions to maintain its leading position in technology. For example, in 2023, Nvidia launched the Ampere-based RTX 30 series of gaming GPUs and the A100 data center GPU based on the Ampere architecture, bringing huge performance gains and energy efficiency optimizations to the gaming and AI fields, respectively. NVIDIA has also launched a series of software and hardware platforms in the AI field, such as Tensorrt, CUDA, Jetson, DGX, etc., providing comprehensive support and services for various application scenarios.
Product quality: NVIDIA's products are known for their high performance, high reliability, high compatibility, and high customer satisfaction, and have won wide recognition and trust. For example, NVIDIA's gaming GPUs support state-of-the-art ray tracing and deep learning supersampling (DLSS) technologies to provide gamers with the most realistic graphics and the smoothest experience. NVIDIA's data center GPUs support the most complex AI models and the largest datasets, providing enterprises and institutions with the fastest computing and best cost-effectiveness.
Market share: NVIDIA has an absolute market advantage and leadership position in the field of GPU and AI, and its products cover many fields such as gaming, data center, automotive, healthcare, education, etc., and has a huge customer base and partners. According to JPR data, Nvidia's gaming GPU market share reached 82% in the fourth quarter of 2023, much higher than AMD's 18%; 77% market share in data center GPUs: NVIDIA has an absolute market advantage and leadership in the field of GPUs and AI, and its products cover games, data centers, automobiles, healthcare, education and other fields, with a large customer base and partners.
According to JPR data, Nvidia's gaming GPU market share reached 82% in the fourth quarter of 2023, much higher than AMD's 18%; In the data center, the GPU market share reached 77%, much higher than Intel's 23%. NVIDIA has also established in-depth partnerships with the world's largest cloud service providers, such as Amazon, Microsoft, Google, Alibaba, etc., to provide them with high-performance AI computing platforms. Ecosystem: NVIDIA is not only a chip manufacturer, but also a builder of an ecosystem. NVIDIA creates an open, innovative, and collaborative AI ecosystem for developers, researchers, businesses, and consumers by providing a complete software stack, development tools, educational resources, community support, and more. For example, NVIDIA's CUDA is a widely used parallel computing platform and programming model that supports thousands of GPU-accelerated applications; NVIDIA's TensorRT is a high-performance deep learning inference engine that supports a variety of frameworks and hardware platforms; NVIDIA's Jetson is an embedded AI computing platform that supports a variety of use cases for edge computing and the Internet of Things.
Despite these advantages, Nvidia also faces some risks and challenges, mainly from the following aspects:
Competitors: NVIDIA's competitors include not only traditional chip manufacturers, such as Intel, AMD, Arm, etc., but also some emerging AI chip startups, such as Cambrian, Graphene, Insight, etc., as well as some technology giants, such as Google, Amazon, Huawei, etc., all of which are developing their own AI chips to meet different needs and scenarios. According to a report, the size of the global AI chip market is expected to grow from $8.3 billion in 2020 to $113 billion by 2026, at a compound annual growth rate of 45.52%。This means that Nvidia will face more competition and pressure, especially in the Chinese market, where Nvidia's market share may be eroded by local companies such as Huawei due to U.S. export restrictions and political factors.
*Chain: Nvidia's chip production relies on foundries such as TSMC, and the production capacity of these manufacturers has been affected by the global chip shortage. Nvidia's CEO Jensen Huang said at the fourth quarter 2023 earnings conference** that Nvidia expects revenue in the first quarter of 2024 to be lower than analysts' expectations due to the tightening of the ** chain, and the shortage may continue into the second half of 2024. This may affect NVIDIA's product delivery and customer satisfaction, and may also make some customers switch to other companies.
Innovation difficulty: NVIDIA's chip design and development requires continuous technological innovation and breakthroughs to maintain its leading position in the GPU and AI fields. However, as the complexity and performance of chips increase, the technical difficulties and costs faced by NVIDIA also increase. For example, Nvidia's Ampere-based A100 data center GPU has 54 billion transistors, more than three times that of Intel's latest 10nm CPUs and more than twice that of Nvidia's previous-generation V100 GPUs. Such chip design and manufacturing requires huge investment and risk, as well as close cooperation and coordination with foundries and packaging manufacturers. In addition, NVIDIA also needs to constantly adapt and expand new application scenarios and market needs, such as cloud gaming, autonomous driving, robots, etc., which also requires NVIDIA to innovate and optimize more software and hardware.
Nvidia's Market Prospects and Potential Although Nvidia faces some risks and challenges, it still has broad market prospects and potential. Here are some of the possible future directions and opportunities for NVIDIA:
Cloud gaming: Cloud gaming is an emerging gaming model that moves the running and rendering of games from local devices to cloud servers, and then streams game footage over the network to users' end devices, such as smartphones, tablets, TVs, etc. This way, users can enjoy a high-quality gaming experience on any device without having expensive hardware configurations. Nvidia is a pioneer and leader in the cloud gaming space, and it has launched its own cloud gaming platform, GeForce Now, as well as cloud gaming solutions for other cloud service providers, such as Google Stadia, Microsoft XCLOUD, and more.
According to a report, the size of the global cloud gaming market is expected to grow from 5$700 million to $6.7 billion in 2026, with a compound annual growth rate of 407%。This presents Nvidia with a huge growth opportunity and a new revenue** and user base for its gaming business. Autonomous driving: Autonomous driving is a technology that uses AI technology to realize the autonomous driving of cars, which requires high-performance chips to process massive sensor data and complex algorithms. Nvidia, a leader in autonomous driving, has launched its own autonomous driving platform, Drive, which provides automakers and manufacturers with complete software and hardware solutions from perception, planning, control to mapping, and more. NVIDIA has established partnerships with many global automotive giants and startups, such as Mercedes-Benz, Volkswagen, Tesla, Uber, Waymo, etc., to provide them with high-performance autonomous driving computing platforms.
According to a report, the size of the global autonomous driving market is expected to grow from $54 billion in 2020 to $160 billion by 2026, at a CAGR of 181%。This provides Nvidia with a huge growth opportunity and new revenue** and market share for its automotive business. Robot: Robot is a technology that uses AI technology to realize the autonomous movement and intelligent interaction of mechanical equipment, which requires high-performance chips to process complex visual, voice, tactile and other signals and algorithms.
Nvidia, a leader in robotics, has launched its own robotics platform, iSaac, which provides robot developers and manufacturers with complete software and hardware solutions from simulation, training, deployment, and operation. NVIDIA has established partnerships with many robotics companies and institutions around the world, such as Fetch Robotics, Nuro, OpenAI, NASA, etc., to provide them with a high-performance robotics computing platform. According to a report, the size of the global robotics market is expected to grow from $100 billion in 2020 to $220 billion by 2026, at a CAGR of 145%。This provides Nvidia with a huge growth opportunity and new revenue** and innovation potential for its robotics business.
Nvidia's Investment Strategy and Advice Nvidia is not only a chip manufacturer, but also an investor. Through its investment arm, NVentures, and in collaboration with other venture capital firms, Nvidia has invested in several AI-related startups to expand the boundaries and impact of its technology and business. According to NVIDIA's official blog, since 2023, NVIDIA has invested in more than 20 companies, involving chips, software, hardware, healthcare, education, finance and other fields. Here are some typical cases of Nvidia's investment:
Ayar Labs: This is a company that develops silicon optical connections between chips, which can achieve high-speed, low-power, and low-latency data transmission between chips, providing new solutions for high-performance computing and AI fields. Nvidia participated in the company's $35 million Series B funding round in November 2023 and entered into a technology partnership with the company to integrate its silicon optical connectivity technology into Nvidia's GPUs to improve its performance and efficiency6. Hugging Face: This is an open-source natural language processing (NLP) model library that provides a variety of pre-trained deep learning models, such as BERT, GPT-2, XLNet, etc., to facilitate and support research and applications in the field of NLP.
NVIDIA participated in the company's $15 million Series A funding round in December 2023 and partnered with the company to optimize its model library into a high-performance inference engine based on NVIDIA's GPU and TensorRT to improve its speed and effectiveness7. CoreWe**E: This is a company that provides cloud computing services, using idle GPU resources to provide customers with a high-performance, low-cost, and flexible computing platform, suitable for games, AI, rendering, and other fields. Nvidia participated in the company's $4 million seed round in February 2023 and entered into a technology partnership with the company to combine its cloud computing services with NVIDIA's cloud gaming platform, GeForce Now, to provide gamers with a better gaming experience.
NVIDIA's investment strategy reflects its long-term commitment to the AI space and its support for start-ups. Nvidia isn't just about funding, it's about providing technology, expertise, market focus, strategic planning, and connectivity to NVIDIA's broad technology and business ecosystem. These are all advantages that traditional venture capital firms struggle to match. NVIDIA's investment has also brought new revenue**, new technological breakthroughs, new market opportunities, and new innovation potential to itself.
So, what are some suggestions for people who want to invest in Nvidia? According to some experts and analysts, here are some possible investment strategies and recommendations:
From a long-term perspective, NVIDIA is a company worth investing in because of its strong technology advantage, market position, ecosystem, and innovation capabilities in the GPU and AI space, which are future growth engines and value creators. Nvidia's performance and share price also reflect its leadership and strong demand in these areas. NVIDIA's investment also provides it with new growth opportunities and innovation potential. Therefore, for investors with patience and foresight, Nvidia is a good choice.
From a short-term perspective, NVIDIA's stock price may be subject to some volatility and pressure, as it faces some risks and challenges, such as the threat of competitors, the tension of the ** chain, the difficulty of innovation, and the high valuation. As a result, Nvidia may not be an ideal choice for investors looking for quick returns and low risk. However, if you can seize some suitable opportunities, such as the stock price, the release of new products, the conclusion of new cooperation, etc., you can also obtain some short-term benefits.
From a technical analysis point of view, Nvidia's stock price is currently in an uptrend, but there are also some resistance and support levels, and it is necessary to pay attention to its breakout and ** signals. For example, after hitting an all-time high of $800 in February 2024, Nvidia's share price has seen some ** and is currently hovering around $700, according to Tradin**iew. On the daily chart, Nvidia's stock price is above the 50-day** and 200-day**, indicating that it is still in a bullish trend. However, on the weekly chart, Nvidia's stock price has surpassed the upper band of the Bollinger Bands, suggesting that it may have some signs of overheating. Therefore, for investors in technical analysis, it is necessary to pay close attention to the dynamics and indicators of Nvidia's stock price to judge its future trend and direction.
In short, NVIDIA is a company with strong advantages and potential in the field of GPU and AI, its business involves games, data centers, automobiles, robotics and other fields, and its investment also reflects its long-term layout in the AI field and support for start-ups. Technology meets reading