Financial markets/economy

Nvidia and the record tech market: why still invest in innovation and artificial intelligence?

Posted by MoneyController on 20.03.2024

Driven by innovations in artificial intelligence, the technology sector continues to grow on the stock market. But how are some of the industry giants such as Nvidia, Apple, Google, Intel and Samsung faring?

Nvidia and its latest generation of chips

After a temporary downward correction, Nvidia's shares have returned to growth and are currently trading at around $893 per share. The latest news from the group led by Jensen Huang is the launch of a next-generation chip called the B200 'Blackwell', estimated to cost between 30 and 40 thousand dollars. According to Reuters, it is a semiconductor with thirty times the performance of previous models and will be used in generative artificial intelligence systems such as ChatGPT and Gemini, developed by Open AI and Google respectively.

A chip-related manufacturing ecosystem

Reuters explains how Nvidia is also part of a highly articulated manufacturing ecosystem: there is the contract with the Taiwanese chip manufacturer TSMC; but, as we read in Reuters, there are also collaborations with companies such as Oracle for the creation of artificial intelligence factories ("AI factories") in the field of cloud services; moreover, tech companies such as Ansys, Cadence and Synopsys will use Blackwell, Nvidia's latest generation chip. Electric car maker BYD will also use Nvidia's Drive Thor chip, and weather forecasting companies Spire and Spire global will also exploit the potential of artificial intelligence. Jensen Huang also mentioned the possible qualification of some chips from Samsung Electronics, which specialises in graphics. This simple announcement, according to an article by Lim Hui Jie on CNBC, was enough to send Samsung's share price up by more than 5%.    

Risks and rewards of investing in Nvidia

Reuters also points out that the ratio of market price to expected earnings is now 35 times, down from 58 times a year ago. The reason for this is that earnings forecasts have risen significantly. And this is precisely where the potential risks lie for those who decide to invest in Nvidia today: if the price forecasts turn out to be too optimistic, Reuters concludes, the risk for the shares would be an inevitable downward correction.

Apple and the Gemini generative artificial intelligence system

Meanwhile, negotiations between Apple and Google over the inclusion of the Gemini generative artificial intelligence system on the new iPhone iOS 18 appear to be continuing. As Biagio Simonetta explains in 'Il Sole 24 Ore', the possible agreement would be historic and could allow Apple to catch up in the field of artificial intelligence: Although Tim Cook has spoken of significant investments in the field of AI, it is very likely that the stock market results since the beginning of the year (where there is still a fall of around 5%) are precisely to blame for the Cupertino company's delays on such a crucial issue for technological innovation today.

Intel and the benefits of the CHIPS Act

Meanwhile, US President Joe Biden has announced that Intel has received $8.5 billion from the US government and could receive a further $11 billion: this is one of the effects of the so-called CHIPS Act, the spending measure that the Biden administration wants to bring the production of these technological and strategic devices back within national borders. An article by Kif Leswing in CNBC mentions the presence of some strong competitors for Intel in this sector: AMD, for example, or Qualcomm. Intel, however, is enjoying particular support from the US government as it plans to build factories and research centres: building manufacturing centres within the country's borders is a strategic choice as it helps to free the US from dependence on manufacturers such as Taiwan and from possible disruptions in the supply chain (Leswing raises the case of China invading Taiwan).

Super Micro: +2,600% on the stock market

The race for artificial intelligence is making some companies grow beyond the imagination of many. This is the case of Super Micro, a Californian-American company (its headquarters are just a stone's throw from Nvidia's) that produces components for artificial intelligence devices: as Francesco Bertolino points out in the Corriere della Sera, its growth is almost unbelievable, going from a market value of 5 billion to 62 billion, or +2,600%. However, Bertolino does not hide the fact that some analysts doubt that the company will be able to maintain this pace of growth for much longer.

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