Nvidia is one of a handful of companies that will buoy this year’s rebound in US stocks even as rapid advances in AI create more losers than winners, according to one of the major recent buyers of the US chipmaker’s stock.
Silicon Valley-based Nvidia, whose technology powers AI applications including ChatGPT, last week became the first chipmaker to hit a $1 trillion valuation as investors rushed to companies that are considered the biggest beneficiaries of developments in AI.
In the context of Nvidia, it [AI] it will create some winners and losers… more losers than winners as it disrupts business models across industries, said Rajiv Jain, founder and chief investment officer of GQG Partners.
The obvious winners at this point, other than Nvidia, will be the bigger tech names, whether they’re Alphabet or Meta or those kinds of names, he added. GQG Partners bought $2.3 billion of Nvidias stock in the first quarter and has since increased its stake.
Nvidia’s shares are up 170% this year, adding $575 billion to the group’s market cap, a gain that only surpasses the $721 billion and $654 billion put in by Apple and Microsoft, respectively.
The S&P 500 is up 9% this year, extending a recovery that began in October.
Jain said that while many semiconductor companies are likely to benefit from high barriers to entry and strong demand for their chips, some software and IT services companies could end up on the losing side as AI automates parts of their activities and many of the basic things will be redundant.
But, just like in the dotcom boom, he warned that it’s hard to predict who will be the winner here except for a very few… no one could have predicted that Amazon would be the winner, unless you were betting on Jeff Bezos. It’s easy to say I did it, but there were hundreds of startups in e-commerce, who knew? And not to mention the company itself which has transformed dramatically over the years.
Jain launched Florida-based GQG seven years ago. Inflows of $5 billion in the first quarter helped push his assets to about $100 billion for the first time.
The firm was thrust into the spotlight this year when it invested $1.9 billion in Indian conglomerate Adani Group after it was hit by a US short-seller attack that wiped out up to $145 billion from the its market value. He has since increased his stake in Adani Group companies.
The trigger for rebuilding his stake in Nvidia was the arrival of the AI chatbot ChatGPT, which Jain says heralds increased profits for Nvidia. GQG first bought Nvidia in 2017, but sold out 18 months ago due to concerns about its high valuation.
Last November’s launch of ChatGPT created a surge in demand for Nvidias H100 chips, which group CEO Jensen Huang described as the world’s first computer [chip] designed for generative AI artificial intelligence systems capable of rapidly creating text, images and human content.
Last month, Nvidia provided sales forecasts that beat Wall Street’s expectations by more than 50%.
Jain pointed to a divergence within the tech sector, where big profitable tech companies that make up large swathes of stock indexes are separating from loss-making ones and being pushed higher during the latest leg of a fueled bull market. from the pandemic stimulus.
There were a lot of delusional thoughts in 2021, now there are fewer delusional ones, she said. The quality growth within the technology side is back in the chassis.
The main obstacle for Nvidia is whether it can meet demand, Jain said. Companies continually lose earnings because they can’t meet demand, he said. I think this is the biggest problem Nvidia is facing at this point.
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