Nvidia’s Momentous GTC Conference Sends Shockwaves Through AI Stocks
As the curtains fell on Monday’s trading session, Nvidia launched its annual GPU Technology Conference (GTC) – a much-anticipated event in the tech world often likened to the “Woodstock of Artificial Intelligence (AI).” Attended by a multitude of tech elites, the event showcased CEO Jensen Huang’s keynote, captivating both in-person and online audiences.
Throughout the two-hour address, Huang unveiled Nvidia’s latest innovations, partnerships, and collaborations set to disrupt the tech landscape. The reverberations of these announcements are still resonating today, as investors grapple with the aftermath, a phenomenon akin to the familiar market trend of “buy the rumor, sell the news.”
A jolt in the AI stock market ensued, with AI-focused server manufacturer Super Micro Computer plummeting 10.3%, chipmaker Advanced Micro Devices dropping 5%, and chip designer Arm Holdings slipping 2.8% by 1:26 p.m. ET on Tuesday. The post-presentation analysis revealed a mixed bag of company-specific updates, pointing towards Nvidia’s prominent role in steering these stocks.
Image source: Getty Images.
The Rise of Blackwell: Nvidia’s Groundbreaking Architecture
Nvidia took the stage to unveil its highly anticipated Blackwell architecture, marking the evolution from its esteemed Hopper processors that have set the AI processing benchmark. Dubbed the “world’s most powerful chip” for AI, the B200 graphics processing unit (GPU) took center stage.
The GB200 superchip, a fusion of two B200 processors and a Grace CPU on a unified board, promises unparalleled capabilities. Nvidia also introduced the NVLink network switch chip to bolster communication efficiency and ease the load on primary processors.
These cutting-edge processors are integrated into comprehensive systems like the GB200 NVL72, featuring 36 Grace CPUs and 72 Blackwell GPUs in a seamless rack-scale design. Equipped with a 72-GPU NVLink, the liquid-cooled system acts as a single superlative GPU, delivering a 30-fold performance boost for large language models (LLMs) crucial to generative AI.
As Nvidia’s primary competitor in the AI chip sector, AMD’s stock reaction aligns with expectations, trailing Nvidia’s lead in AI performance. Analysts from JPMorgan note Nvidia’s continuous edge over competitors, while Bank of America analysts highlight the expanding competitive advantage.
Notably, Arm Holdings designed Nvidia’s Grace CPU. This collaboration ensures Arm Holdings receives a share of each sale, whether through royalties or licensing fees.
Super Micro Computer, known fondly as Supermicro, collaborates with Nvidia on its AI-focused server designs, ensuring seamless integration and optimal performance with Nvidia’s AI processors. Supermicro’s recent expansion of its product lineup to incorporate the latest AI powerhouses showcases the intertwined fate of these companies.
The far-reaching impacts of Nvidia’s revelations are poised to shape the trajectories of these entities, heralding both positive and negative repercussions.
Super Micro Computer’s Stock Offering Dampens the Mood
One company-specific development that may have exacerbated Tuesday’s downturn was Supermicro’s disclosure of a secondary stock offering. In the regulatory filing, Supermicro outlined plans to issue 2 million common shares, increasing the total share count to 58.55 million.
Although existing shareholders might frown upon the diluted equity, amounting to approximately 3.5%, the dip in stock value surpasses this dilution concern. Yet, given its proximity to an all-time high, the move maximizes Supermicro’s capital generation potential, potentially raising around $1.8 billion at its current price of approximately $900.
Assessing Investment Potential Amidst the Chaos
Despite the turbulence, many market analysts believe the AI industry is in its nascent stage, spelling extensive opportunities for the involved players. For instance:
- Supermicro stands as the preferred server choice for businesses diving into AI adoption, thanks to its modular approach facilitating seamless scalability.
- Arm Holdings oversees a vast intellectual property reservoir, poised to benefit from the escalating adoption of AI through burgeoning royalties and licensing income.
- AMD offers viable alternatives to Nvidia’s AI chips and supplements them with self-designed CPUs, positioning it to harness the prevailing AI trend.
From a valuation standpoint, Supermicro emerges as the most cost-effective in the cohort, sporting a forward price-to-sales ratio of 2. Meanwhile, AMD and Arm Holdings command multiples of 9 and 33 times forward sales, respectively.
For steadfast investors unfazed by volatility, each of these stocks unveils intriguing prospects, especially given the early stage of AI’s prevalence in the market.
As the dust settles, the trajectory of AI stocks hinges on navigating the aftermath of Nvidia’s industry-shaping revelations.