Every major new technology produces a big winner that especially stands out. With the PC, I’d go with Microsoft. It’s harder to pick just one winner with the internet, but Google parent Alphabet and Amazon would both be great picks.
Any of these three companies are also contenders to be the big winner with generative AI. However, the hands-down favorite right now has to be Nvidia (NASDAQ: NVDA). The AI stock skyrocketed 150% in the first half of 2024. Here’s why it could go even higher.
Worthy of the hype
In March, Nvidia introduced its new Blackwell platform. The company claimed that Blackwell will “power a new era of computing.” Is that merely hype? I don’t think so.
Blackwell enables customers to build and deploy large language models (LLMs) with 1 trillion or more parameters at up to 25 times less cost and energy consumption than Nvidia’s Hopper architecture. It can also support up to four times faster training of LLMs and 30 times faster inference. This new platform isn’t limited to generative AI, though. Its other uses include engineering simulation, electronic design automation, quantum computing, and more.
Nvidia CFO Colette Kress said in the company’s second-quarter earnings call on May 29 that demand for Blackwell “is well ahead of supply.” She added that this dynamic could extend “well into next year.”
In June, CEO Jensen Huang told shareholders, “The Blackwell architecture platform will likely be the most successful product in our history and even in the entire computer history.” Is this statement an exaggeration? Probably not the first part of it. We’ll have to wait and see about the second part.
A “who’s who” of the AI world has already lined up to order Blackwell chips. The list includes cloud service leaders Amazon, Microsoft, Google, and Oracle. It features AI innovators OpenAI, Tesla, and Elon Musk’s XAi. Nvidia has also announced several top electric vehicle companies will use its new Drive Thor self-driving car technology based on Blackwell architecture, including BYD and XPeng.
But what about…?
Before we assume that Blackwell will be a slam-dunk catalyst that pushes Nvidia stock higher, let’s address a few potential obstacles. Huang singled out one issue during the recent annual shareholder’s meeting: competition.
Nvidia’s success is unquestionably attracting attention from rivals. Big chipmakers including AMD and Intel hope to take away some of Nvidia’s market share. Major cloud service providers including Amazon and Google offer their own AI chips. But Huang isn’t worried. He believes the lower total cost of ownership (TCO) of Nvidia’s chips will keep rivals at bay.
Another persistent concern about Nvidia is its valuation. One analyst recently downgraded the stock largely because of its premium valuation. However, if Blackwell achieves the level of success Huang predicts (or anywhere close to it), Nvidia stock could be undervalued.
An economic downturn would likely dampen Nvidia’s growth. The good news, though, is there aren’t any dark clouds in sight on that front. The U.S. appears to have avoided the recession many economists predicted in the not-so-distant past.
Speed on its side
I think there’s one other factor that’s key to Nvidia continuing its strong momentum. The company’s speed in innovation could keep the growth story going for years to come.
Huang noted in Nvidia’s Q2 call that the company is now in “a one-year rhythm” of rolling out new technology. The reality is Nvidia’s rivals can’t keep up with it right now. If Nvidia can regularly roll out new chips that lower the TCO while delivering greater performance, the high-flying stock is likely to soar much higher over the next several years.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Alphabet, Amazon, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, BYD Company, Microsoft, Nvidia, Oracle, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Nvidia Stock Skyrocketed 150% in the 1st Half of 2024. Here’s Why It Could Go Even Higher. was originally published by The Motley Fool
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