This week, we’re being treated to the GTC conference from Nvidia (NASDAQ:NVDA). It has been referred to as the Woodstock of AI because CEO Jensen Huang typically lays out the multi-year roadmap for AI computing. Already this week, we’ve had some big reveals. Even though the Nvidia share price has risen positively in the short term, I think there could be long-term impacts too.
Autonomous vehicles
Nvidia announced progress on a previously announced partnership with Uber about rolling out Nvidia-powered autonomous vehicles, along with additional partnerships with rideshare platforms. Huang described this as a “ChatGPT moment for autonomous driving.”
I do get why Nvidia will be an important cog in this machine. Self-driving cars require enormous compute, with chips in each vehicle and a huge amount of training infrastructure. If autonomy scales globally, Nvidia could become the go-to place for car makers to tap into in order to get key software for the vehicles.
Even though that could still be some way away, the news with Uber is something for investors to get excited about sooner. Los Angeles and San Francisco were revealed as testing cities for next year.
The full AI stack
For some who aren’t into tech much, references to GPUs, CPUs, AI agents, and more can be confusing. However, broadly speaking, Nvidia is a leader in hardware (such as GPUs). Yet what the conference has shown is Nvidia wants to control every layer of AI computing. This means the hardware, but also the software, the infrastructure, and the applications (like the autonomous vehicles).
It’s a bold vision for the future, but owning the total stack means higher profit margins. It provides an ecosystem where Nvidia controls the client from beginning to end.
I’m not convinced this will totally be possible, but the news is massive. The company’s profitability would increase markedly, even without growing the customer base. Clients would simply use Nvidia for more of their existing services, thereby increasing Nvidia’s market share.
$1trn of AI chip demand
In arguably the most eyebrow-raising part of the conference, Huang said orders across Blackwell and Vera platforms could reach $1trn by 2027. That’s a staggering number. Even if this is a bit optimistic, we’re still talking about hundreds of billions of dollars worth of spending from companies.
Some investors like to value stocks based on the expectation of future revenue or earnings. In that case, the current Nvidia share price looks cheaper right now based on the new revised assumption of higher income for the next year.
The share price is up 53% over the past year, outstripping the S&P 500. Even though it’ll take some time for people to digest the conference details and see if some projects become a reality, I think it sets the company up for a continued rally over the coming year and beyond.
Of course, there are still risks. AI is the hottest area right now, and everyone is jostling for market share. More than that, the key Chinese market is being restricted by US government export controls. At a high level, over 90% of revenue for Nvidia comes from its data centre business, which can be argued to be overly concentrated and risky. Even with these concerns, I think it could still be a stock to consider for investors.
