Artificial Intelligence (or AI) is the most disruptive technology of this decade and one of the biggest investment trends.
What started as a bold, almost unrealistic idea several decades ago has become part of the day-to-day lives of billions of people.
The latest iteration of this technology, generative AI, has already made its way into professional software, such as integrated development environments (or IDEs) that software engineers use, and design applications such as Adobe Photoshop. It has also started disrupting the content industry.
(We would like to confirm that this article was written by humans, not AI.)
AI also serves several scientific purposes, where massive computational capacity can help sequence complex proteins and DNA structures.
This scale of computation is well beyond human ability. It can speed up research at the scale scientists could only dream about in the past.
The technology is also part of the “digital brain” of electric vehicles and e-commerce assistants.
The usage of AI is virtually unlimited, and the technology has been improving by processing ever more data. Its self-learning capacity is only limited by the capacity of the hardware it runs on.
That’s why the companies that supply “picks and shovels” technologies for the AI megatrend are set to benefit first.
This is not a speculation. We’ve started seeing the results already.
NVIDIA’s Triumph
Take NVIDIA. The tech giant gained 24% in its share price in the wake of its quarter-end results at the end of May. That’s over $207 billion in extra market capitalization—a fantastic gain in a challenging economy.
The company even briefly touched a $1 trillion market value, and it is still hovering close to that mark.
NVIDIA’s results beat market estimates and the company’s own outlook. The tech giant made $7.2 billion in total sales, eclipsing the $6.5 billion target. Its data center segment looked particularly strong. And that segment is exactly the “picks and shovels” component of the AI megatrend.
NVIDIA is taking full advantage of it and getting rewarded by investors.
For the next quarter, the company expects to book $11 billion in total sales (a 64% year-over-year growth). This explains the massive gain in share price as investors expect the company to prosper from the AI megatrend and continue placing their bets accordingly.
After all, NVIDIA supplies 70% of the world’s top 500 supercomputers. It plans to increase its market share and further expand the computational capacity of its chips.
The company is a pioneer in the industry. In 2006, it developed the CUDA programming language that became a core technology element for OpenAI (the creator of ChatGPT), as well as for Microsoft Azure, Amazon Web Services (AWS), Google Cloud, Oracle, Meta, and others.
Now the company is set to profit from supporting final users who are building massive AI structures and models.
Chips, and graphic processing units (GPUs) in particular, are still not easy to obtain. Elon Musk recently went public, saying:
“GPUs are considerably harder to get than drugs.”
That’s why we think the AI megatrend is far from over. Leading industry analysts expect it to keep gathering momentum.
Statista projected the AI market size to grow from $142 billion last year to $1.9 trillion in 2030. That’s a 13x increase in less than a decade.
Investors could expect massive inflows of funds into the sector and position their portfolios accordingly.
Thank you for your loyal readership,
The Financial Star team
