The former Google CEO and chairman is bullish on Nvidia’s business.
Artificial intelligence (AI) is nothing new for Alphabet: In 2001, the company (then called Google) built machine learning into its search engine to help correct spelling mistakes, and five years later, it released Google Translate, an AI-powered language translation tool.
Eric Schmidt served as CEO from 2001 to 2011 and steered Google through two major AI milestones. He served as chairman of the board for four years, before taking over as chairman of the board from 2015 to 2018.
You’d think Schmidt would see Google as the leader in AI, but apparently not. Here’s why the former Google CEO sees Nvidia as the leader in AI: (NVDA -2.12%) Without a second thought, AI is the winner.
Nvidia’s big advantage
Schmidt recently spoke to a Stanford University class about AI. A video of the talk was initially posted online but later removed at his request. During the talk, Schmidt offered a positive view of Nvidia’s future.
Schmidt, the former Google CEO, remains connected to the tech industry. He told Stanford students that the big companies he’s spoken to plan to invest heavily in data centers to support AI, primarily using Nvidia’s graphics processing units (GPUs). “I’m talking to big companies, and they’re saying they need $20 billion, $50 billion, $100 billion. It’s very tough,” Schmidt said.
Schmidt said Nvidia’s rivals are still far behind, and he thinks it will be hard for them to close the gap. The reason is simple: The open-source tools that many AI developers use are based on Nvidia’s CUDA programming language.
What about Advanced Micro Devices’ new AI chips? Schmidt said AMD’s software used to translate CUDA code “doesn’t work yet.”
“You know what to do.”
“If all of that $300 billion is going to NVIDIA, you know what to do in the stock market,” Schmidt told Stanford students, before quickly adding, “This is not a stock recommendation.” But his remarks are the closest thing to an endorsement of NVIDIA without actually recommending the stock be purchased.
NVIDIA reported $26 billion in revenue for the first quarter of fiscal 2025. The company’s guidance calls for $28 billion in revenue for the second quarter. If Schmidt is right and NVIDIA’s revenue will soon grow by $300 billion, that should give the company’s stock a big boost.
Schmidt was the most bullish on Nvidia, but he also had a positive view of the company’s largest customer, arguing that larger companies that can afford to invest heavily in Nvidia chips will have a big advantage over smaller rivals that can’t afford to spend as much.
Schmidt didn’t specifically name his former company as a potential AI winner, but he said there are only three “state-of-the-art” AI models, and the gap between those three and the rest “seems to be widening.” Google Gemini is almost certainly one of the three AI models he mentioned, along with OpenAI’s GPT-4 and Anthropic’s Claude.
Nvidia isn’t an easy choice for everyone
No investor should not buy NVIDIA stock just because influential technology leaders believe the company has high growth potential. Schmidt may be wrong. Even if he is right, NVIDIA may not be a great fit for every investment portfolio.
That said, I wholeheartedly agree with the former Google CEO that Nvidia stands to benefit greatly from increased AI spending by major companies, and whether or not his $300 billion figure is accurate, we’ll likely see a lot of money flowing into Nvidia over the next few years.
Of course, Nvidia’s $3.2 trillion market cap already has huge revenue growth priced in. Valuation expert Aswath Damodaran believes the company will need new growth markets beyond AI infrastructure to attract investors at this point, and I think he’s right. But I also think there are big new market opportunities for Nvidia in the coming years.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keith Speights holds shares in Alphabet. The Motley Fool holds shares in and recommends Advanced Micro Devices, Alphabet, and Nvidia. The Motley Fool has a disclosure policy.
