Companies, like people, have a life cycle.
NVIDIA 
NVDA The stock price drop in July signaled to some investors that this was a mature company past its growth peak and would evolve into a value stock. After a staggering 2,654% gain over the past five years, is it possible that NVDA stock could continue to rise?
Nvidia’s stock price rose above $130 a share in June, before dropping below $100 before recovering to $110. The next day to watch is Aug. 28, when the company reports its third-quarter earnings.
It’s time to revisit Nvidia’s AI vision before deciding whether to re-enter or give up.
Jensen’s Dream
Nvidia is fortunate to have co-founder Jensen Huang still at the helm. Like Intel, 
International Trade Commission Andy Grove is a legend, but unlike his successors, he is a product obsessive, and product obsessives grow companies for customers, not just shareholders.
Huang is focused on evolving AI chips derived from graphics processing units (GPUs), with the current H-100 Hopper becoming the B-100 Blackwell next year and the R-100 Rubin, named after astronomer Vera Rubin, in 2026.
The design is based on “Huang’s Law,” the belief that progress in numerical computing chips will outpace circuit density, driven primarily by larger chips. Nvidia chips are currently sold to data centers, the modern-day equivalent of mainframes, but over time they should evolve into single server racks, server boxes, and eventually the PCs and laptops of the future.
The result will be Star Trek-esque computers, offering a variety of interfaces, incredibly fast absorption of vast data sets, and instantaneous analytical capabilities beyond human capabilities.
When it comes to the evolution of AI, Huang believes we’re in a similar place to where the PC was in the 1970s. This isn’t too far-fetched, as Nvidia began to emerge in manufacturing graphics cards for gaming PCs.
Jensen’s Nightmare
There are two problems with this vision, which are the cause of NVDA stock’s recent decline.
First, there’s the energy consumption of the Hopper AI chip, which is unsustainable.
Blackwell and Rubin will consume even more energy. Nvidia talks about efficiency. But customers are now bringing coal plants back from mothballs and dreaming of nuclear reactors.
The second is the nature of current AI software. The first version of OpenAI’s ChatGPT was revolutionary. The fourth version is not. Large-scale language models (LLMs) are prone to “hallucinations” – producing impossible answers because their analysis lacks real-world structure.
This leads AI to draw people with three hands. It leads self-driving cars to crash into pedestrians. Today’s AI is Spock, demanding logic in Kirk’s illogical world.
For AI scientist Gary Marcus, this means the generative AI boom is about to come crashing down. The boom may have come crashing down in July, when analysts decided the industry’s revenues and growth rates weren’t enough.
If LLM is a dead end, it means AI must evolve through software. We need new algorithms and new ways to model intelligence. Nvidia’s software can model a variety of AI algorithms, but it can’t model something that doesn’t exist yet. For AI to move forward, new things need to be invented.
Conclusion
The boom that began with ChatGPT in November 2022 is collapsing. But that’s not the same as claiming that AI is just another “metaverse.”
Jensen Huang’s dream is not gone. Hardware is ahead of software. To get to true “artificial intelligence”, we must first consider what true intelligence is. That will take time and will evolve in parallel with, or even behind, AI hardware. Science cannot be rushed.
What does this mean for investors? If you’re in your 20s, 30s, or 40s, buy NVDA stock when it dips for your retirement account. If you’re in your 70s or 80s, you might not have time to wait.
As of the publication date of this article, Dana Blankenhorn held a long position in INTC. Opinions expressed in this article are those of the author and follow InvestorPlace.com’s publication guidelines.
On the date of publication, the editor in charge did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of “Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law,” available in the Amazon Kindle store. Tweet us @danablankenhorn, connect on Mastodon, or subscribe on Substack.
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