avatarEnrique Dans

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Nvidia: the sky’s the limit

Nvidia’s valuation, which since late 2022 has skyrocketed, surpassed Amazon’s this week, and could be about to overtake Alphabet to become the fourth or even the third most valuable company in the United States. A company I have written about recently, the kind that spends 30 years making decisions that are difficult to explain to stock market analysts obsessed with short-termism, only to finally succeed “overnight”.

Nvidia’s founder, Jensen Huang, whose family moved to the United States when he was nine, predicted many years ago that computing needs would skyrocket at some point, that the logical thing to do was to carry out these general purpose computing processes on graphics processing units (GPUs) and that to get to that point, research and development efforts had to be concentrated, without being distracted by siren songs such as the opportunity presented by the growth of the smartphone market.

Today, Huang, in addition to being number 21 on the Bloomberg Billionaires Index, is a manager with a reputation as a visionary, who had to watch as a bunch of analysts who do their job no better than a blindfolded monkey throwing darts at a wall, played down his efforts and told investors to stay away from his company. Nvidia’s case is a demonstration of why we should not trust financial analysts, and why, when they are listened to, they distort markets, bringing out the worst in society and stifle innovation that takes time and effort to achieve.

Now, Nvidia is the absolute star of the markets, and to try to compete with it, there are those who are considering financing rounds of between $5 and $7 trillion that would not even remotely guarantee success, while Huang himself says that this is all over the top. That’s the thing about knowing your business. Meanwhile, his company announces a line of chips customized to each company’s needs that could bring it even greater growth.

Nvidia’s stock price has, as of today, no clear ceiling. It has managed to become, in the midst of the gold rush of artificial intelligence and when all companies know that if they do not incorporate it they will not be able to be competitive, the company that sells the best shovels and the best sieves, the ones you really know you need if you want to take the search for precious metals seriously. Companies that sell tools always gain the most when a new technology takes off, and Nvidia is a textbook case.

(En español, aquí)

Nvidia
Chips
AI
Artificial Intelligence
Machine Learning
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