Reed’s view
Nvidia makes great GPUs. Its X posts leave something to be desired.
The company appeared defensive Tuesday when it responded to a scoop in The Information about Meta considering purchasing Tensor Processing Units, Google’s in-house AI accelerators that power Gemini and other products.
“NVIDIA is a generation ahead of the industry,” it posted on X after congratulating Google on its success. The market, which only a week ago was heaping praise on Nvidia after a stellar earnings report, saw it as a sign of weakness, causing a minor slip in its stock price.
Public relations exec Lulu Cheng Meservey blamed the post on the company’s corporate communications team, rather than Nvidia CEO Jensen Huang, who can captivate audiences for hours without rehearsing. (All three companies declined to comment.)
Even if the tweet didn’t come from Huang himself, it’s the product of a culture of intensity that originated with his DNA. Huang hates to lose even the smallest deals, according to people who’ve witnessed his reactions when he does.
But Nvidia is going to lose a lot of deals in the near future. Its market share in AI chips is an unbelievable and unsustainable 90%. It has growing competition from AMD, newer startups with more specialized chips, and now, Google’s TPUs.
That’s not cause for concern, unless you believe the AI business is a bubble and it’s about to burst. But if you believed that, you would have dumped all your Nvidia stock already.
The thing that makes AI different from any technology that came before it is that its total addressable market is every business and every consumer on the planet. Assuming AI capability grows and infrastructure improves, Nvidia’s sales are going to keep growing even as its market share shrinks.
The problem with its X post is that playing defense can only be a distraction for a company that is so clearly on offense.
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Room for Disagreement
In an opinion piece for The Motley Fool last month, tech analyst Manali Pradhan wrote that Nvidia “may face serious challenges” next year as competitors improve their GPU technologies. “AMD’s recent strategic partnership with OpenAI underlines the confidence in this new AI chip,” she wrote, adding that Nvidia also faces supply chain and pricing pressures. “AMD’s increasing technological prominence in the GPU market poses a significant challenge to Nvidia’s supremacy.”
Notable
- In a recent Substack post, investor Michael Burry of Big Short fame took aim at Nvidia and other AI giants, including Palantir — specifically criticizing the way hyperscalers are accounting for the depreciation of their chips, which he said could lead to “hefty writedowns,” Business Insider reported.