Huang, founder of the big tech that enables artificial intelligence, led the company to go head-to-head with the two giants in terms of stock market value. The unknowns about the future? The Antitrust ax and the Chinese invasion
FROM OUR CORRESPONDENT
TAIPEI – When Jensen Huang enters Computex in Taipei, Asia’s largest technology fair, he creates a wave in the crowd that gathers in the pavilions. His now famous leather “nail” is a magnet. Anyone who sees him tries to get closer. To have a chat, to get a selfie or a signature, preferably on a device with the Nvidia logo on it, the company that Huang leads and which he has made to become the second in the world by capitalization on Wall Street. And he, who in Taiwan is truly a prophet in his homeland, does not retreat. He blesses the fans, exchanges a “high five”, starts stadium chants in the stands, gives away local products bought in a small shop, autographs anything including the décolleté of an exuberant fan (which has caused him inevitable criticism).
This 61-year-old engineer, born on the island targeted by Beijing but raised and educated in the United States, knows it’s his time and enjoys rock star status. He is «Mister Three thousand billion», meaning the dollars that his company is worth on the stock market, more than Apple and with only Microsoft in front. He is the “Taylor Swift of technology”, as the BBC defined him. The reason is easy to explain. As a public figure, Jensen (born Jen-Hsun) Huang exploded like a supernova together with Nvidia, founded in 1993 with two partners in a modest Californian fast food chain. Today he is the fourteenth richest man in the world.
The engine of the (new) technological revolution
Nvidia is the engine of the artificial intelligence revolution. Its chips are at the heart of at least 80% (other estimates say 90%) of data centers and supercomputing centers. OpenAI’s ChatGpt was the shock that generated the tsunami of generative artificial intelligence. Huang has surfed the huge wave on Wall Street, leading Nvidia to results unthinkable before November 2022. By the time you read this article, Nvidia on the Nasdaq will be listed at the new price after the 10-for-1 stock split, finalized after the markets closed on Friday . A split that came after a run that saw NVDA stock gain 205% in the last year and 580% in the last three years.
Nvidia’s prospects depend on its ability to keep revenues and earnings running: Despite an inevitable future slowdown, Nvidia will benefit from projected 36.6% annual growth in spending on AI hardware, software and services through 2030. In the latest quarter, revenue jumped 262% to $26 billion, the gross margin increased 12 percentage points and net profit jumped 462% to $15.2 billion.
Doubts about Nvidia’s infinite growth
More than one analyst has expressed doubts about Nvidia’s infinite growth. Cathie Wood, tech evangelist and CEO of the Ark Invest fund, evoked sinister parallels with Cisco, whose shares rose 71-fold before the dot-com bubble burst in March 2000 and then plummeted 90% in the following years (they have never reached an all-time high since). “Today, Nvidia is that company,” wrote Wood last March, who at the beginning of 2023 had had the terrible idea of unloading his fund’s shares in Nvidia. The point of the thesis is that, just as Cisco’s routers and switches had enabled the Internet revolution, Nvidia is the company that defines the era of artificial intelligence with its chips. Own Huang’s overtaking of Tim Cook is a good allegory of the paradigm shift: Apple created the world of mobile Internet with the iPhone, now Nvidia cards will usher in the era of pervasive and ubiquitous AI.
Dominant position
There are actually many points that disprove the analogy with Cisco. Cisco’s competitive advantage in the late 1990s was not comparable to Nvidia’s today. Nvidia’s strength comes not only from the complexity of its products, but also from the vastness of its ecosystem. «Nvidia started at the end of the last century with the so-called GPU architectures, Graphics Processing Units, the graphics chips, which soon due to their great power were used for different purposes such as scientific computing. And then they exploded with “deep learning”», he explains Cristina Silvano, professor of Advanced Computer Architectures at the Polytechnic of Milan and with ongoing research in the field of accelerators for deep neural networks. One of the strong points is CUDA (Compute Unified Device Architecture), the Nvidia platform to make the most of the capabilities of its processors: «Having over 80% of the market – adds Silvano – CUDA has become a very widespread language for everything which concerns parallel computing, even if some more “open” alternatives have arisen.” And then he concludes: «It is difficult to predict the future but it is likely that Nvidia will maintain a dominant position, despite competitors such as AMD and Google. And there will be large investments in AI for mobile applications, “on the edge”, from robots to autonomous systems. Nvidia is present there but it can have many rivals.”
Nvidia, the “AI factory”
At Computex, Huang revealed the future of the company: last March he presented the Blackwell superchip, Rubin will arrive in 2026 (and in the meantime there will be Blackwell Ultra), with a new version of its semiconductors every year. And he announced the goal of being the “AI factory” that will make productivity soar in sectors worth 100 trillion dollars, from information technology to manufacturing and services.
There are two unknowns on the road to Mr Three Thousand Billions. The first is the investigation that the US Antitrust is about to open for alleged abuse of a dominant position. The other obviously is Xi Jinping: it is precisely in Taiwan that Nvidia produces the majority of its chips and an invasion of the island would have consequences that are difficult to predict.
Sign up for the L’Economia newsletter
The ideas of Ferruccio de Bortoli and Daniele Manca
Facts and people read through the lens of economics.
Whatever it Takes by Federico Fubini
The challenges for the economy and markets in an unstable world
Europe Matters by Francesca Basso and Viviana Mazza
The Europe, the United States and Italy that count, with innovations and important decisions, but also small notable stories
One More Thing by Massimo Sideri
From the world of science and technological innovation, news that changes our lives (more than we think)
And don’t forget the newsletters
The Economy Opinions and The Economy 6pm
June 10, 2024
© ALL RIGHTS RESERVED
