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Why Nvidia Stock Is THE Only Way to Play AI Right Now

AI is driving a wave of innovation worldwide. It empowers human creativity, aids in combating the transmission of diseases, transforms urban landscapes into smart cities, and revolutionizes data analysis across diverse industries. With AI, individuals and companies gain extraordinary capabilities to accomplish their life’s work.

AI emerged as the focal point of Nvidia’s (NASDAQ:NVDA) GTC 2023, as CEO Jensen Huang delivered a keynote highlighting a pivotal moment for the technology. Huang likened AI to the energy source fueling accelerated computing’s “warp drive engine.” 

He emphasized how generative AI’s remarkable capabilities have prompted companies to urgently reimagine their products and business models. 

Nvidia is at the center of this transformation. Their platform supports businesses worldwide through deep learning applications and data science. 

Let’s dive into how Nvidia can continue to drive AI innovation over the long-term.

NVDA Nvidia’s  $313.06

A Background on AI and GPU Chips

Artificial intelligence entails the creation of self-sufficient systems that can handle and analyze vast quantities of information in order to find patterns. 

The expansive and evolving field of AI focuses on creating systems that can perform tasks beyond human capabilities but at remarkable speeds. Due to its disruptive nature, AI is recognized as a profoundly transformative technology.

In recent years, the convergence of powerful computing, abundant data, and intelligent algorithms has fueled AI’s rapid growth. This synergy enables AI systems to analyze massive data sets and learn from patterns, driving significant advancements in the 21st century.

So What?

Nvidia played a pivotal role in the early stages of AI development. Sutskever, Krizhevsky, and Hinton, under Nvidia’s technology, pioneered AlexNet, a revolutionary neural network for computer vision. 

Their groundbreaking work, winning the ImageNet competition in 2012, set the stage for significant AI achievements in the following decade. This work directly influenced the success of various AI applications, including Google Photos, Google Translate, Uber, Alexa, and AlphaFold.

Nvidia’s crucial contribution to the development of AI cannot be overstated, as affirmed by Hinton. 

Nvidia’s GPUs were initially designed for immersive PC gaming experiences. Since then, they’ve proved to be a perfect fit for running deep learning algorithms. 

Without Nvidia’s GPUs, the groundbreaking success of AlexNet, and subsequently, the advancements in deep learning, would not have been possible.

Sutskever’s role in the AI field highlights the explosive hype surrounding large language models like ChatGPT and DALL-E 2 in 2023. These models have captured the public’s attention, reminiscent of the iPhone’s groundbreaking impact in 2007.

Once again, Nvidia plays a crucial role in this advancement. Today’s  generative AI models need thousands of GPUs. Nvidia holds an 88% market share among advanced GPUs powering this revolution. 

Notably, OpenAI relied on 10,000 Nvidia GPUs for training ChatGPT, exemplifying their essential contribution.

Where Do We Go From Here

Shares of various top chip makers, notably those of Nvidia, Advanced Micro Devices (NASDAQ:AMD), and Micron Technology (NASDAQ:MU), experienced strong price increases this year. 

Indeed, these stocks not only outperformed the overall marketplace. They crushed it. Investors have sought out ways to play the rise in artificial intelligence, and these companies have become the picks-and-shovels way to play the sector.

I think this sort of out-performance could continue for some time. Now, trees don’t grow to the sky. Nvidia’s valuation is approaching extreme levels, meaning there’s likely to be some reversion at some point.

However, this surge in interest around the world’s premier advance chip maker is certainly warranted. Nvidia powers most of the most promising technologies of this day. As these technologies improve, and more companies jump on these trends, Nvidia remains the way to play this growth.

Long-Term Growth Potential Is Real

NVDA stock is expected to continue its upward trajectory as investors recognize the company’s sound position to benefit from the flourishing AI industry. 

With its chips fueling various sectors like healthcare, data centers, generative AI, gaming, autonomous driving, and robotics, Nvidia holds the leading position as the world’s largest chip maker with a market capitalization of nearly $783 billion. As the global AI market is projected to expand from $515 billion in 2023 to $2 trillion by 2030, Nvidia is well-positioned to capitalize on this growth.

While Nvidia faces competition from rivals like AMD and Alphabet (NASDAQ:GOOG) as well as geopolitical challenges, experts agree that the company’s platform strategy and software-centric approach are incredibly formidable and difficult to surpass. Although they may not maintain complete dominance indefinitely, Nvidia’s strong position in the market remains noteworthy.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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