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🥁 Nvidia Joins the Trillion Dollar Club

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BEN Beats
May 31, 2023

Read time: 4 minutes | Total savings in this newsletter: $700

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Nvidia Joins the Trillion Dollar Club

Nvidia (NVDA)‘s market cap passed $1 trillion yesterday. Briefly.

NVDA is up 170% year-to-date (YTD) and 50% just in May. The shares hit a daily high of over $418, pushing the market cap just at $1 trillion, before closing at $401 by the end of the trading day. NVDA market cap currently sits $992 million.

Nvidia is the 5th company to currently have over a $1 trillion market cap as of Tuesday, the other four being Apple, Microsoft, Amazon, and Alphabet.

Analysts believe Nvidia could soon surpass ~$1.6 trillion, which is the same market cap of Alphabet (Google's parent).

Ironically, just last August Nvidia was saying it had "too many GPUs" and was lowering their costs. Nvidia gets a lot of attention every crypto bull market, as demand for GPUs for crypto mining during those times skyrockets through the roof.

Nvidia also benefitted from the pandemic as cloud usage surged. But as the times moved on from both those events, Nvidia had hit a slump in late 2022.

That is, until ChatGPT brought everyone back in an AI-fueled landgrab.

Nvidia's Computex 2023 keynote last weekend had many AI announcements, including its Avatar Cloud Engine (ACE) for input and responses natural language and a new DGX Gh200 supercomputer that's capable of an exaflop (one quintillion floating point operations per second).

The AI hype trained entrenched Nvidia’s market share, and Nvidia made over $2 billion in profits in three months.

Real quick, Price-to-earnings ratio (P/E) divides a company’s share price by it’s earnings per share (EPS), which is how much a company earns per each share of stock. P/E ratios allow investors and analysists to compare different stocks with each other. A high P/E ratio means that there is more demand to buy a stock relative to how much it is earning.

Forward Price-to-Earnings (Forward P/E) uses forecasted earnings for the calculation. This could be helpful for predicting how a stock will look in the future. In Nvidia’s case, investors continue to seem bullish, as Nvidia’s forward price-to-earnings multiple (P/E) sits as 47.23, which is significantly above Qualcomm (QCOM) and Intel (INTC). It also tops the sector median of 18.09.

The AI trend

Google Trends show that AI has surpassed inflation, Bitcoin, and Ukraine in investment-related searches.

Source: Bezinga Crypto

According to a Reuters report, 80% of GPUs for AI purposes are currently manufactured by Nvidia.

All is not super dandy for Nvidia though. Their GPUs are getting very expensive, with the Nvidia H100 going for as much as $40k on resale marketplaces. Many companies are looking to develop their own hardware in response.

Microsoft is reportedly building its own AI chips for Sam Altman’s OpenAI as well as their own projects. Codenamed Athena, it’s been in development since 2019, and should help reduce the costs of powering OpenAI’s ChatGPT.

According to two anonymous sources familiar with the company, Elon Musk purchased ~10,000 GPUs for an upcoming Twitter AI project despite spearheading a letter calling for an industry-wide halt on AI development due to societal concerns.

Chinese developers has been rapidly advancing on GPU development, working around U.S. sanctions imposed in 2022 that banned Chinese companies from accessing the most advanced chips on the market, including the A100 chips and the H100.

Nvidia’s competitors are up as well, for example:

  • Advanced Micro Devices, Inc. (AMD) – up 30% last week

  • Broadcom Inc. (AVGO) – up 27%

  • Taiwan Semiconductor Manufacturing Company (TSM) – up 20%

  • Micron Technology, Inc. (MU) – up 14%

Looking beyond public companies, there are private competitors as well. A report by Jon Peddie Research has identified 18 major GPU development companies worldwide:

General purpose GPUs for PCs and data centers

Solely focused on AI and High-Performance Computing (HPC)

Mobile System-on-a-Chip (SoC)

Semiconductor intellectual property core (IP)

It seems like it’s always a safe bet on the rails that power innovation. The reliable adage “sell the shovels during the gold rush”. Technologies may come and go along with its hype cycles, but there will always be demand for the computing power necessary to run these services. The real question is whether Nvidia will maintain the largest market share or will its competitors catch up with their own hardware. Also, whether or not NVDA is currently overvalued given the massive runup it just experienced.

Trending News 🗞️

  1. These firms say they found an SEC-friendly crypto path. They got a special pass even Coinbase couldn’t get.

  2. Bankrupt crypto hedge fund 3AC’s NFT auction fetches $2.5m. Meanwhile they still owe $3.5 billion to creditors.

  3. ’Inferno Drainer’ scam-as-a-service has stolen $5.9m since March. Instead of scamming, they are selling tools to the scammers.

  4. Secret Service owns crypto, loves blockchain, and has an NFT collection. They told everyone about it in a Reddit AMA.

  5. Axie Infinity rolls out ‘Lite’ version of crypto game on Apple App Store. Baby steps in getting NFTs on the app store considering how restrictive Apple’s policies are.

  6. Binance launching NFT loan feature. It’s only been a week since we told you about the rising popularity of NFT lending.

  7. Cronos Labs launches second cohort of $100m Web3 accelerators. Looks like Crypto.com is investing in more than just giant arenas.

  8. Dogecoin chart pattern suggests volatility explosion ahead. The king of memes is fighting back for the throne.

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