Editor’s Note: We’re all wondering what Nvidia will report when its earnings drop on Wednesday. Our own Adam O’Dell chimed in with his thoughts on the state of AI and Nvidia’s potential going forward in Banyan Edge this week.
Read on…
What’s Next After NVDA’s 17,400% Run?
If you’d invested just $3,600 in Nvidia Corp. (Nasdaq: NVDA) back in February 2016…
Your position would now be worth $642,000.
According to a recent study from Northwestern Mutual, that’s nearly half the amount needed for an average American to retire comfortably in 2024.
And you weren’t exactly making a longshot investment at the time, either.
NVDA’s 2016 annual revenue stood at an already-massive $6.9 billion — up 37% from the year before.
The company was already a world leader in cutting-edge gaming hardware. Its high-tech graphics processing units (GPUs) featured thousands upon thousands of independent cores, giving them rendering capabilities that were light-years ahead of dual- and quad-core CPUs.
Unlike the prerendered special effects we see in Hollywood blockbusters, Nvidia’s graphics cards allowed you to render entire digital worlds in real time.
Hardcore gamers would eagerly fork over as much as $1,500 just to see their favorite games rendered in dazzling 4K or 8K resolution. You could even use the same Nvidia card to power a virtual reality headset.
But then, users began to realize their gaming hardware could do even more than that … much more…
Nvidia’s “Second Life” Through Crypto and AI
As it turned out, the unique architecture of modern GPUs made them vastly more effective than CPUs for tasks like cryptocurrency mining.
With its thousands of independent cores, a graphics card from Nvidia is 10X more efficient and more powerful than a typical CPU for mining crypto.
By the time cryptocurrency boomed in 2019, Nvidia’s GPUs had become the hardware of choice for crypto miners all over the world. Sales skyrocketed amid extremely high demand.
Miners were buying up so much of Nvidia’s output that the company developed “low hashrate” (LHR), with the crypto capabilities disabled, just to give gamers a chance to upgrade their hardware.
And even though the crypto mining market is now well established, a handful of other new breakout mega trends have emerged to demand more GPUs than ever before.
Artificial intelligence (AI) is far and away the largest of these mega trends. According to a study from Intelligent Computing, the computational power required to sustain AI’s rise is doubling every 100 days.
If we want to unlock a 10X improvement in AI efficiency, we’ll need 10,000 times the computational power that we currently have on tap.
But this revolutionary tech is still in its infancy. So beyond asking ChatGPT to write an essay or make up a recipe, we have little real-world experience with AI-based programs. It’s hard for us to even imagine what’s going to be possible thanks to Nvidia’s hardware in the future.
Other new mega trends like high performance computing (HPC) have delivered even more immediate results…
The cloud-based gaming service Boosteroid serves more than 5.7 million gamers across three continents with a network of cutting-edge GPUs.
Boosteroid’s GPUs (AMD Radeon RX 7900 XT) cost $1,295 at retail. But through a monthly Boosteroid subscription, gamers can effectively “borrow” them for less than $9 per month.
This is the kind of technology that simply wasn’t possible just a few years ago.
Now, it’s taking the world by storm.
The End of a “Magnificent” Run?
From video games to world-changing AI research, Nvidia’s success story is one for the record books.
It’s the standard bearer for mega-cap “Magnificent Seven” tech stocks, and its 17,400% run seems to have been well-earned.
At the same time, Nvidia has also become a victim of its own success…
The company has become so popular that the other Big Tech stocks account for over 40% of Nvidia’s revenue.
That’s why Nvidia’s earnings announcement next week will be the biggest AI event of the year.
But all that Big Tech spending is a double-edged sword for AI.
While that’s great news for Nvidia’s bottom line…
It could also send the broader markets into a complete panic.
What we’re seeing today is the calm before the storm.
And Wednesday’s announcement could send shockwaves through the market.
For my complete report on NVDA’s upcoming earnings (and the $1 billion AI breakout that’s poised to start soaring), just go HERE.
To good profits,
Adam O’Dell
Chief Investment Strategist, Money & Markets