Nvidia NVDA is one of most valuable companies in Generative AI
We’ve heard so much about the good and bad of artificial intelligence in the last few months that many of have become numb. Through all the confusing chatter, AI remains an important and rapidly growing opportunity, with different leaders in different subsegments already emerging. Nvidia is one of those companies.
In thinking about Nvidia and AI, we should first state that AI has many different segments. Recently, the spotlight has been on the Chatbot segment, particularly ChatGPT, developed by OpenAI. Several other players have ventured into Chatbot tech, including Microsoft MSFT with its Bing and Edge search engines and Google GOOG with Bard. Elon Musk has expressed interest in launching his own AI app called TruthGPT. And we can anticipate many new competitors in the future.
Ifs, Ands and Bots
Generative AI is another important segment — and it happens to be the corner of the AI sandbox in which Nvidia plays. Nvidia is a chip manufacturer specializing in graphics processing units (GPUs) — which are essential for AI applications because they can perform the complex calculations needed for generative AI tasks like image recognition and natural language processing.
To be sure, AI has experienced periods of both rapid and sluggish growth throughout its existence. We now find ourselves in a phase of swift expansion, and it seems to show promise for sustainability. But this does not guarantee that current industry leaders will maintain their positions in the future.
This cycle plays out in many industries. In wireless, Motorola MSI held sway for decades before missing the shift from analog to digital in the 1990s, resulting in their loss of leadership. Subsequently, companies like Blackberry BB , Palm and Nokia NOK took the reins, leading a strong growth curve for the following decade. And then new competitors and technologies reshaped the landscape once again. Apple’s AAPL iPhone, Google’s Android, and Samsung’s SSNLF Galaxy emerged as the dominant players and so they have enjoyed sustained growth for the past fifteen years.
The same thing happened with early social networks like AOL, Compuserve and Prodigy. These companies led for years before they were replaced by the likes of Facebook META , LinkedIn, Twitter, Instagram and so many others.
Mind the Curve
Today Nvidia seems to be hitting all the right notes. That said, formidable competitors exist in the AI and Generative AI space. So, while I appreciate Nvidia’s current trajectory and achievements, ongoing transformations have the potential to disrupt long-term plans.
It’s important to key an eye on the growth curve I so often emphasize. Companies and technologies rise, crest and decline. Some have the foresight to create the next growth curve. Others not so much.
Consider Motorola, whose last significant success was the StarTac phone. The company lost its way in the 1990s, plummeting from the top to the bottom of its competitive set. Years later, the company tried to revive its fortunes with the Razr, which provided a temporary boost. But then Razr became outdated; the growth curve once again rose, crested and fell and Motorola failed to identify the next wave to ride.
Today, Motorola is still around, and it is still trying to recapture its glory days. In fact, they are still trying with an updated Razr.
Conversely, leaders such as the iPhone, Android, and Galaxy have demonstrated long-term success. The key lies in effectively navigating the growth wave and creating the subsequent one before the current curve exhausts itself.
Nvidia has done a great job in securing a prominent position in today’s AI race. But it’s essential to remain attuned to the latest developments within the company, its performance, shifts in the industry and more.