Nvidia’s (NVDA) stock is under pressure Friday as a recent sell-off erases $118 billion of its market cap. This downturn follows the company’s brief stint as the most valuable company in US markets. Microsoft (MSFT) is once again the most valuable company heading into Friday’s trading session.
Moor Insights & Strategy Founder, CEO, and Chief Analyst Patrick Moorhead joins the Morning Brief to share his perspective on Nvidia’s outlook.
Moorhead draws a parallel between Nvidia’s current trajectory and Cisco’s (CSCO) rise in the early 2000s. “Cisco was the driver and the builder of the infrastructure for the internet age, and there was over-investment in this space,” he explains. Similarly, Nvidia now finds itself as the primary infrastructure provider for the generative AI technology sector.
However, Moorhead emphasizes that Nvidia’s continued dominance hinges on sustained enterprise demand for their offerings. He cautions if customers stop buying Nvidia’s offerings, “then this whole gravy train comes to a screeching halt.”
Looking ahead, Moorhead states: “If Nvidia and its partners can stick this landing and enterprises can start either leveraging the benefits from enterprise SaaS [Software as a Service] companies… or building their own, then this is going to be a 5 to 10-year run. And maybe we won’t see the dot-com bust like we saw years ago.”
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This post was written by Angel Smith
Video Transcript
What we do want to talk about.
Of course, in video, those shares still under pressure flying back.
Some of the downside pressure that we’ve seen that stock looking like it’s down about 2.5% as we head into the market open in about 30 minutes time, more experts comparing this recent a craze to the calm bubble of the early two thousands joining us now to discuss, we have Patrick Moorhead, more insights and strategy founder, Ceo and chief analyst, Patrick.
It is always a pleasure to speak with you.
You are the foremost expert in this space, I like to say.
So I appreciate you coming on this morning.
There’s this question out there comparing NVIDIA to a Cisco.
You’ve been in the game long enough, talk to me about your take on that comparison.
Yeah, so I grew up in the.com era, I think I was about 10 years into my career and there are definitely parallels, right, Cisco was the driver and the builder of the infrastructure for the uh internet age.
Uh And there was overinvestment in this space and NVIDIA is clearly one of the biggest builders for infrastructure of this generative A I days and we do need to be very careful and look for what I call the precursors of something that could pull back.
Now, first off, I don’t see anything changing for 6 to 9 months, but we do need to look at the downstream profitability that people in the ecosystem are making or not making.
These are the software companies like Adobe Sales force sap and Service now because if those enterprises and those consumers aren’t paying more for those new A I features, then this whole gravy train comes to a screeching halt like we saw in those the internet bust.
And so all these things considered, what, what is NVIDIA going to need to continue to prove on a sequential basis at this juncture that’s gonna be critical to cement this broader story that they’ve been able to sell the markets on.
Yeah.
So growth, it’s growth, growth and and more growth and this next generation of NVIDIA growth, the new growth will be all about the enterprise, 80% of data for companies and businesses is still on site or on the enterprise edge.
So what they’re doing is they’re enabling companies like H Pe Dell Technologies and pure storage and Lenovo to build that out.
And this week uh I actually personally attended the HP and the pure storage event.
This is what it was all about.
This is the second layer of this data center build out well and it’s interesting in your notes to us, you explained that this is a private cloud play, how bullish of a signal is that for the chip sector in general, but specifically here for NVIDIA.
Well, it’s very positive.
First of all, there’s a little bit of a diversification of risk because if the only enterprise A I plays are in the public clouds, then it’s pretty much a winner.
Winner take all and I I view this enterprise play as a, there’s something really here and then what you do is you have the VM Ware that’s owned by Broadcom, the red hats of the world uh IBM software and even software from H PE that will get a, a lift and a juice from this infrastructure build out.
And, and here’s the thing that uh the enterprise data center play is more durable than, let’s say the public cloud play.
It’s kind of the gift that keeps on giving.
So if NVIDIA and its partners can stick this landing and enterprises can start either leveraging the benefits from enterprise SASS companies like I talked about or building their own, then this is going to be uh a 5 to 10 year run and maybe we won’t see uh the.com bust like we saw uh uh decades ago.
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