Elon Musk’s latest warning to Nvidia

Nvidia Corp. (NASDAQ:NVDA) made headlines recently for joining the elite “trillion dollar group” after its market cap briefly surpassed $1 trillion in the last week of May.

Nvidia is one of only a few companies with a 13-digit valuation. The most well-known include: apple inc, Amazon.com Inc.Google parent alphabet inc And microsoft corp Some of these have even surpassed the $2 trillion mark in the past few months.

Nvidia’s rise has been driven by increased demand for semiconductors during the COVID-19 pandemic as the job market has adapted to remote work, and the recent artificial intelligence (AI) boom.

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The AI ​​Boom

While experts are divided on whether Nvidia can maintain its dominance in the AI ​​chip market, almost everyone agrees that AI is the next big thing in tech. ChatGPT, the viral generative artificial intelligence tool that was downloaded almost half a million times in the first week of its launch, has become the fastest growing consumer application in history. According to UBS analysts, the AI ​​platform reached 100 million active users in just the first two months, a feat not seen in the “20 years after the internet space”.

While Nvidia stock’s severe overvaluation could make it too expensive for retail investors, investing in AI-powered startups like Gameflip on popular crowdfunding platforms can be a viable alternative. While the likelihood of a near-term drop in Nvidia stock prices is high as the stock has already started a decline, startups using AI technology can take advantage of the recent AI boom without worrying about temporary stock market falls to have to.

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The best-performing stock in the S&P 500 Index

Nvidia has been the best-performing stock over the past several years, successfully capitalizing on rising demand for microchips and the rise in popularity of AI. Nvidia stock is up more than 165% year-to-date and nearly 130% over the past year, and is among the biggest winners from the pandemic and recent focus on AI.

Analysts have long been bullish on Nvidia. Angelo Zino, Analyst at CFRA Research, stated, “We view Nvidia as the most important company on the planet in an era that is rapidly shifting towards one where greater AI capabilities will be paramount.”

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Nvidia’s AI power tool: A100 chips

Nvidia’s flagship GPUs and AI chips have made it the most valuable company right now. Thanks to increasing demand for AI chips for data centers and generative AI applications from OpenAI, Google and Microsoft, Nvidia is facing a “huge record year”, according to CEO Jensen Huang. The company beats old industry giants including Intel Corp. and Advanced Micro Devices Inc., reflecting the fast-moving environment of the technology industry.

According to a New Street Research report, Nvidia controls 95% of the market share in GPUs used for AI and machine learning. Its crown jewel, the A100 chip, costs around $10,000.

Huang hailed OpenAI’s ChatGPT for its recent success and fleeting trillion-dollar rating.

“The focus was on generative AI,” he said, “we know that CPU.” [central processing unit] Scaling slowed, we know accelerated computing is the way to go, and then the killer app showed up.”

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Overvaluation concerns and Elon Musk’s warning

It’s no surprise that shares of the world’s most valuable publicly traded semiconductor manufacturer are overvalued. Nvidia stock, which has nearly tripled over the past eight months, currently trades at 49.87 times forward non-GAAP earnings. The industry forward forward price-to-earnings ratio is 22.33, while Taiwan Semiconductor Manufacturing Co. Ltd., one of the world’s leading semiconductor manufacturers, is trading just above 20 times forward earnings.

Billionaire polymath Elon Musk, known for his controversial stance on various socioeconomic issues and spirited tweets, responded to a tweet that said Nvidia stock had the highest returns of any US stock over the past 10 years .

Musk explained that Nvidia’s monopoly on the AI ​​chip market will soon end and other semiconductor manufacturers will expand their innovation and production capacities.

“Also many other NN [neural network] Accelerator chips are also under development. “Nvidia won’t have a monopoly on large-scale training and reasoning forever,” the Tesla CEO tweeted on June 7. Nvidia stock hit a one-month low on June 7 following Musk’s tweet.

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