By Nicki Bourlioufas
Nvidia has overtaken Nvidia has overtaken Alphabet and Amazon in market value this week to become the 3th largest company in the US, and looks set to take on Apple for second place, a huge milestone in a rally fuelled by soaring demand for its GPUs, holding the greatest market share in AI computing.
Quite the Valentine’ day present for me, a Nvidia shareholder, who, as a single women, likes the boost. It might not be a bunch of red roses, but along with my other investments in AMD, Broadcom, and ASML, it’s not a bad bunch!
You can see the ranking of the largest US companies here, and Nvidia this week became the fourth largest company in the US, moving closer to the world’s biggest company Microsoft, and Apple, followed by Alphabet.
Lesser known US chip and software infrastructure company Broadcom entered the Top 10 US companies this year and looks set to overtake Tesla this month too.
My bet is that will continue Nvidia will close in on Apple and Microsoft and could become the second largest company in the US and the world after overtaking Amazon and Alphabet in 2024, Tesla and Berkshire Hathaway in 2023 and Meta in 2022.
Staying with the momentum
The momentum is with Nvidia and other chip companies such as AMD, Broadcom, ASML (now Europe’s largest tech company) and ASMI International, also soaring higher, and they are likely to keep on going this year and well beyond, building their revenues and shareholder wealth.
The flow of money into computer chip companies and their suppliers is fundamentally changing capital allocation in the world’s largest economy and that is likely to continue. We need computer chips such as high tech GPUs like never before. Which is why the US government is throwing billions in R&D to support the semiconductor sector and making sure through trade restrictions on Nvidia that the Chinese can’t get its GPU technology.
And it’s not just momentum. Geopolitical factors alone point to the ongoing dominance of these companies. Nvidia’s market share and that of other US chip producers and equipment suppliers is being protected by US and European regulators who are determined to keep the latest chip technology out of China.
Some experts are still calling an end to the US tech rally, linking the outcome to the US interest rate outlook, which is very short sighted indeed.
Short and long term factors underpin the momentum behind chip companies. Generative AI is only part of the story; the demand rising for advanced computer chips that can process computer applications will endure for the long term and still represents a huge growth opportunity for Nvidia and others.
This century’s oil
Computer chips too are the ‘oil’ of the 21st century. The world will need ever increasing numbers of computer chips and faster ones as we move into an increasingly digital world, much like the world needed oil last century to drive industrialisation. Now we need chips to drive computer applications, not just AI functions but all digital processes.
Momentum too is forcing everything up. February has seen fresh records for the US share market.
And it’s not just momentum. Moore’s Law too tells us that computer chips are constantly evolving, so new products is always being launched to improve the productivity of chips in what is the world’s most complex manufacturing process.
Even better, Nvidia’s market share and that of other US chip producers and equipment suppliers is being protected by US and European regulators who are determined to keep the latest chip technology out of China.
And while AI has brought Nvidia and GPUs to the spotlight, GPUs have been important for a long time. While I drew a comparison between computer chips and oil, I admit that’s crude, given oil is a commodity and computer chips are the product of the world’s most complex manufacturing process.
The initial drawcard to Nvidia
What brought me to Nvidia in the first place?
Good spin I spun for a client, and the logic that computer chips bring us and represent.
Back in 2021, I pitched the potential benefits of investing in Nvidia on behalf of global asset manager VanEck, which held Nvidia as the largest stock in its video gaming fund ESPO, followed by AMD. I was so convinced by my own spin that I bought both up.
That spin was right on the money.
The story I pitched to business reporters and editors around the world at Bloomberg, Reuters, Yahoo, the AFR, the SMH, The WSJ, The Australian, was that if investors wanted to diversify out of the FAANG stocks, Nvidia was a good bet. The company would potentially grow more quickly than the FAANGs in the years to come, given its importance as a key producer of graphics processing units (GPUs). Demand for GPUs was racing ahead in 2020-21 with pandemic-heightened gaming and the surge in crypto mining. It still is with AI.
But back in 2021, no journalist or editor wanted to know or asked any questions when I pitched on Nvidia’s benefits as a great investment set to overtake the FAANGs, such was the focus on Bitcoin and other crypto assets. No one in the media wanted to know about GPUs or knew what they were, unless they were a gamer.
But I bought up. I invested in Nvidia at less than US$200/share in 2022, and I bought AMD on dips when it fell below US$100 in 2023 and in 2022, convinced that both companies would fly. I bought Microsoft, Apple and Alphabet shares early last year.
Another chip supplier to Nvidia and AMD, and Dutch born chip equipment supplier, ASM International, has gained tenfold in five years. And the next five? I’ve put money on its continued run, being a market leader in the technology used to create logic and memory chips; what’s to stop the momentum?
That’s an even more logical question to ask rather than how interest rates will affect long-term demand for chip producers and their suppliers, as many experts have done.
Want help to spot and tell a good story? Contact Nicki Bourlioufas on +61 411 786 933 or email at nicki@spotoncpr.com