Nvidia, a leader in artificial intelligence (AI) (NVDA 2.24%) is scheduled to host the 2024 AI Summit starting October 7th. This event brings together leaders from across the industry to see and hear from the leading voices in AI. This is your chance to get a glimpse of the future of this potentially revolutionary technology.
With such a big event coming up, you may be asking yourself, “Should I invest in Nvidia now?” History may give us a hint. Let’s take a closer look at the company.
Nvidia crushes rivals
There was a time when Nvidia and its longtime rival Advanced Micro Devices were in a close battle for control of the gaming market. Generally speaking, the two companies’ income statements were comparable. That has changed. Since the AI inflection point in late 2022, Nvidia has dominated AMD, making more profits than AMD’s total revenue. Look at this graph. It shows how ground-breaking the recent changes are.
NVDA Revenue (TTM) data by YCharts.
That’s what you get when you control 90% of a market as valuable as AI silicon. The great news for Nvidia is that the gravy train doesn’t seem to be stopping anytime soon. The message from the rest of the big tech companies, those representing the bulk of the business, is that spending is likely to accelerate in the near future.
This is a race of sorts, and no major company can afford to be left behind. “For us, the risk of underinvestment is dramatically greater than the risk of overinvestment,” Alphabet CEO Sundar Pichai said in the company’s latest earnings call. Alphabet expects to spend about $50 billion in capital expenditures (capex) this year, up from $32 billion a year ago, and it’s not alone.
For now, the majority of this spending still goes to Nvidia, as AMD, Intel, and other companies struggle to match the power and efficiency of Nvidia chips. The current generation remains in huge demand, and the company’s next generation is likely to ship in the coming months. The huge profits that Nvidia enjoyed means it spends a lot of money to maintain its advantage. Even though Nvidia is already in the lead, its R&D spending outspent AMD by roughly 2-to-1 last quarter.
what history says
This is the third year in a row that Nvidia has hosted an AI event like this. The company kicked off these events in 2022 with a virtual event focused on voice in AI. 2023 was supposed to be the first year of a full-fledged multi-day AI summit, but the event was moved online for just one day. This year’s event will be held in person over three days.
Despite the more subdued conference format, both previous iterations led to significant increases in Nvidia’s stock price. Stocks rose by up to 10% in the week following the 2022 event. In 2023, it rose by 6.5%. So, will this year’s conference also lead to a rise in stock prices? perhaps.
I know this may be a disappointing answer, but the truth is we don’t know for sure. First of all, a two-year period is a very small sample size to draw firm conclusions from. Also, correlation is not causation, even if there are years to refer to. Just because two things may be related, such as an AI summit and a stock price spike, doesn’t mean one is a result of the other.
However, this incident serves as an opportunity to remember the power that AI has. Rather than thinking about possible short-term stock price movements, focus on the company’s long-term prospects. Don’t lose sight of the forest for the trees. This is a cutting-edge company that enables the introduction of potentially transformative technologies.
Suzanne Frey, an Alphabet executive, is a member of the Motley Fool’s board of directors. Johnny Rice has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, and Nvidia. The Motley Fool recommends Intel and recommends the following options: November 2024 $24 short calls on Intel. The Motley Fool has a disclosure policy.
