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  • Mal McCallion

Nvidia's $25bn gamble: AI boom ain't over yet

Updated: Nov 5, 2023

Nvidia CEO Jensen Huang bets big on AI, forecasting the boom will continue into next year and beyond.

Nvidia's CEO, Jensen Huang, is making a bold prediction: the artificial intelligence (AI) boom isn't going anywhere. In fact, he's so confident that he's backing up his optimism with a whopping $25 billion bet.

The company's recent sales forecast has left Wall Street expectations in the dust, and Nvidia plans to buy back another $25 billion of its shares. This move is typically seen when company leadership believes their stock is undervalued.

(It can also happen when a business hasn't got a clue what to do with its astonishing cash pile - you'll recall that Rightmove has been doing this regularly because it simply hasn't had any idea what on earth it can spend its billions on. This may be changing soon, however ...)

Nvidia's confidence is rooted in its near-monopoly on the computing systems powering AI services like OpenAI's ChatGPT. The company plans to increase production of its hardware into next year, dispelling doubts about the longevity of the AI craze.

Huang attributes this demand to two key trends: the shift from traditional data centres to ones built around Nvidia's potent chips, and the growing use of AI-generated content in various sectors. "This fundamental shift is not going to end. This is not a one-quarter thing," he assures.

Huang's daring move to buy back stock at an all-time high surpasses even the most significant AI investments made by other tech giants. Yet, Nvidia's price-to-earnings multiple has fallen, and the company's adjusted gross margins nearly doubled in its second quarter. However, not everyone is as optimistic. Some analysts warn that many tech companies are heavily investing in Nvidia's graphics processing units (GPUs) before establishing how they will monetise the products developed with these chips.

Huang acknowledges the biggest risk Nvidia faces is securing supplies. The company's most significant sales driver this quarter was its HGX system, a highly complex computer built around Nvidia's chip. Any missing component can delay shipments, but Huang remains confident, stating, "We're getting great cooperation from our supply chain."

In the high-stakes world of AI, Nvidia is going all-in. The question remains: will this gamble pay off? Only time will tell.

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