Prediction: Artificial Intelligence (AI) Leader Nvidia Is Going to Plunge by More Than 50% | The Motley Fool

🌈 Abstract

The article discusses the rise of artificial intelligence (AI) and its impact on the global economy, with a focus on Nvidia's dominance in the AI-GPU market. It also examines the historical pattern of "next-big-thing" innovations and their tendency to experience bubble-bursting events, suggesting that Nvidia may face a similar fate despite its current success.

🙋 Q&A

[01] The Rise of AI and Nvidia's Dominance

1. What is the estimated impact of AI on the global economy?

• According to a PwC report, AI is expected to add $15.7 trillion to the worldwide economy by 2030, through a combination of increased productivity ($6.6 trillion) and consumption-side effects ($9.1 trillion).

2. How has Nvidia's stock performance been since 2023?

• Nvidia's stock has gained more than 700% and added over $2.6 trillion in market value in just over 17 months.
• Nvidia briefly surpassed Apple to become the second-largest publicly traded company in the U.S. and recently completed a 10-for-1 forward-stock split.

3. What is driving Nvidia's lightning-quick growth rate?

• Nvidia's growth has been entirely fueled by the sale of high-powered graphics processing units (GPUs) used in AI-accelerated data centers.
• Nvidia's H100 GPU has become the go-to choice for businesses wanting to train large language models and run generative AI solutions.
• Nvidia has an 88% share of the AI-GPU market in the first quarter, according to Jon Peddie Research.

4. How has Nvidia been able to increase its price points and margins?

• Demand for Nvidia's GPUs has been outpacing supply, even for its next-generation Blackwell chip, which is believed to be sold out well into 2025.
• This supply-demand imbalance has allowed Nvidia to meaningfully increase its price points and pump up its margins, which reached 78.4% in the first quarter of fiscal 2024.

[02] The Bubble-Bursting Trend of Next-Big-Thing Innovations

1. What is the historical pattern of next-big-thing innovations?

• There have been numerous next-big-thing trends and highly touted innovations that have attempted to follow in the footsteps of the internet, but none have come close to matching its impact.
• These innovations and trends are often set up for failure due to investors' tendency to overestimate their adoption and utility, leading to bubble-bursting events.

2. What examples of next-big-thing innovations have experienced bubble-bursting events?

• The article does not provide specific examples, but it states that there is a lengthy and flawless track record of next-big-thing innovations experiencing bubble-bursting events, with leading stocks shedding between 50% and 99% of their value.

3. Why does the article suggest Nvidia may face a similar fate?

• The article argues that despite Nvidia's current success, history has an even longer track record of not being wrong when it comes to next-big-thing trends.
• Nvidia is also set to face increased competition from Intel and AMD, as well as the potential for its top customers to develop their own AI-GPUs, which could reduce Nvidia's dominance and pricing power.