Is the AI Winter Coming
Those closest to the AI business are behaving as such even which their words are contrary
Nvidia is a company that manufactures GPUs. I first heard of GPUs back in the early 2000s. It used to make gameplay a lot smoother.
A GPU, which stands for graphical processing unit, renders images such as graphics on the computer screen. It needs to process all the pixels simultaneously so that it can render every pixel on the screen. They were an accessory 25 years ago for those who wished to play games on their computers.
The way AI algorithms work, they throw a ton of spaghetti on the wall and see what sticks. This implies the need for parallel processing, which GPUs excel at. CPUs which run your computers are better at sequential tasks.
Since Nvidia was the market leader in the space, it became the preferred supplier of GPUs to most companies that were building AI models. In some ways, Nvidia has become a proxy for the entire AI industry in the world. They have the fastest, most-preferred and well-tested GPUs in the world.
OpenAI announced ChatGPT, and the war for GPUs began. Companies are raising ever larger funding rounds to buy more and more GPUs to run larger and larger models all the pursuit of something called Artificial General Intelligence (AGI). AGI is about producing the sort of intelligence that can cut across subjects, much like humans do.
The agreed thesis is that if companies double down on the models and keep increasing the number of parameters, it would automatically deliver AGI.
For the past 2 years, companies have been doubling and doubling their orders to Nvidia. It reflects in their revenue.
There has been an even greater rise in their share prices. Their revenues have grown 5-fold, their share price 10-fold. That implies that investors are assuming that there is more growth to be secured.
Given all this, there is some strange dealmaking going on.
The profit machine, Nvidia, has been investing its profits into its customers!
NVIDIA and OpenAI today announced a letter of intent for a landmark strategic partnership to deploy at least 10 gigawatts of NVIDIA systems for OpenAI’s next-generation AI infrastructure to train and run its next generation of models on the path to deploying superintelligence. To support this deployment including datacenter and power capacity, NVIDIA intends to invest up to $100 billion in OpenAI as the new NVIDIA systems are deployed. The first phase is targeted to come online in the second half of 2026 using NVIDIA’s Vera Rubin platform.
Source: OpenAI
OpenAI will buy goods from Nvidia and give it paper in return.
Today, Microsoft, NVIDIA and Anthropic announced new strategic partnerships. Anthropic is scaling its rapidly growing Claude AI model on Microsoft Azure, powered by NVIDIA, which will broaden access to Claude and provide Azure enterprise customers with expanded model choice and new capabilities. Anthropic has committed to purchase $30 billion of Azure compute capacity and to contract additional compute capacity up to 1 gigawatt.
Source: Nvidia
NVIDIA and Nokia today announced a strategic partnership to add NVIDIA-powered, commercial-grade AI-RAN products to Nokia’s industry-leading RAN portfolio, enabling communication service providers to launch AI-native 5G-Advanced and 6G networks on NVIDIA platforms. NVIDIA will also invest $1 billion in Nokia at a subscription price of $6.01 per share. The investment is subject to customary closing conditions.
Source: Nvidia
Why would Nvidia invest its cash into its customers? Maybe its customers are not going to be able to afford its products any longer? Its customers are unable to make the kind of money that they should be able to and are about to fail? This is one way of keeping that from happening. By kicking the can down the road, Nvidia could be hoping that these companies would be able to find the kind of revenues that they hope to find.
When everyone is looking for gold, sell them spades. But the spades will continue to sell only if there is gold to be found.
You could loan them the money to buy the spades, hoping that at some point they will indeed find gold. What if they don’t?
People who would know more than we would,
A viral AI-driven analysis of US SEC filings has resurfaced the scale and frequency of Nvidia CEO Jensen Huang’s stock sales this year, showing the chipmaker’s founder executed near-daily liquidation of shares worth roughly USD 13 million per day for several months.
Source: Moneycontrol
This would translate to $286 million in shares sold per month, assuming 22 trading days. Why only $13 million? If he did sell more aggressively, it would get alarm bells ringing.
Thiel Macro LLC fund’s Form 13F filing indicated that the investor no longer had any shared in Nvidia as of September 30. As a result, his staggering departure fuelled the sale of more than 537,000 shares in the company from July to September. According to Investing.com’s analysis of the firm’s average stock price during this period, the shares’ sale price is estimated to be nearly $100 million.
Given the full-fledged Nvidia exit’s status, this shift has shrunk his fund’s equity book by nearly two-thirds. His holdings in the firm reportedly accounted for nearly 40% of his portfolio.
Source: Financial Express
Peter Thiel is selling all of his holdings in Nvidia.
The market was abuzz last week with the news that Michael Burry, who became famous for shorting the stock market during the 2008 mortgage crisis, was betting against Nvidia and Palantir Technologies. Both stocks fell recently, and the revelation of Burry’s position may have contributed to that.
Source: Motley Fool
There are several people making bets against Nvidia, and its own CEO is reducing his stake in the company. Why?
Unless the AI party is about to come to an end…