Nvidia overtakes Apple on Wall Street
10 JUN, 2024
By Jose Luis Palmer from RankiaPro Europe
Last week Nvidia overtook Apple on Wall Street to become the second most valuable brand. Artificial intelligence pushes Nvidia into second place and its rise seems unstoppable. Managers react to the latest news and the rise of AI
Nvidia, the No.1 in GenAI
Edmond de Rothschild AM Big Data fund management team
Nvidia is the absolute No.1 for having an 80%+ share in generative AI accelerator (GenAI) computing hardware, followed by Microsoft, Amazon, Meta, Google, which are trying to develop application extensive language models (LLMs) and new monetisation combined with their existing business model based primarily on software and cloud. The last group of Apple and Tesla, both of which have concrete use cases for GenAI, but struggle to deliver to the end customer in consumer electronics and automotive applications in the near term. All of these companies and those needed to maintain their product development should continue the upward momentum of their assets. Indeed, the supplier companies make up what we call the Horde.
While Nvidia is the undisputed champion of generative artificial intelligence (AI), its momentum drags many companies in its wake: from subcomponent suppliers to power grid upgrades. Nearly $7 trillion in market capitalisation moves in tandem with Nvidia, now showing a correlation of over 0.5. These companies include Marvell, AMD, Applied Materials as well as companies such as VAT Group in Switzerland, ASML in the Netherlands and Vertiv and Eaton, industrial companies with exposure to data centre cooling and grid modernisation. These companies have posted average gains of 25% in 2024 and 60% in the past year (compared to 22% and 7%, respectively, for the market) since generative AI gained significant stock market traction.
Nvidia, the Artificial Intelligence engine
David Rainville, Luca Fasan, Marie Vallaeys, managers of Sycomore AM, part of Generali Investments' ecosystem
Nvidia did not disappoint. Instead, the global maker of microchips used to train and run artificial intelligence models delivered spectacular quarterly results on 22 May. The company once again beat consensus estimates, with sales of $26 billion (consensus expected $24 billion). Considered a barometer of the artificial intelligence industry, Nvidia has also published optimistic forecasts for the coming months. The stock has crossed the symbolic $1,000 threshold, but is still trading at multiples that, in our view, do not yet show signs of exuberance.
We expect Nvidia's share of the AI microchip market to remain above 80% for several years, thanks to the company's technological lead over its rivals and the high barriers to entry in the sector. In the future, the strong growth of the company, in which we remain fully invested, will inevitably carry over into the supply chain. We are therefore convinced that companies supplying components or services to AI graphics processing units will also stand to gain.
Accordingly, we have recently initiated positions in Asia Vital Components, a Taiwan-based supplier of hardware components, Astera Labs, a US-based supplier of semiconductor solutions, and Vertiv. The latter, based in the US, designs water-cooling technologies for data centres, which help reduce the overall energy consumption of these energy-intensive facilities by 10%.
Generative AI around the world
Alex Tedder, head of global equities, Schroders
The company's GPUs (graphics processing units) are best-in-class products, capable of handling the complex computations required by the large language models that drive generative AI applications. Following an extraordinary acceleration, revenues are expected to double year-on-year by 2023.
However, the sustainability of the company's growth profile is uncertain. In the near term, an overcapacity scenario is entirely plausible, especially as key customers, such as hyperscaler vendors, have been volatile spenders in the past.
