Nvidia Bubbling Nicely

This is a great chart, compatible with the idea that the secular uptrend in Nvidia shares is by no means over.

Investors and analysts overanalyse stocks, trying to interpret meaningless daily price movements and newsflow with temporary effects as having much greater significance than is warranted.

Nvidia is at the heart of the AI boom, and there is nothing to suggest that the boom is over. Below is a clue as to why Nvidia is such an insanely exciting company.

As you know, NVIDIA is the best platform for open models in the world. We are the standard for open models everywhere. And so number one, OpenAI, number two, all the open models; number three, Anthropic, Number four, xAI, just take your list, keep working. I think NVIDIA’s coverage of models last year increased substantially, which explains our accelerating growth at a very large number. We are already a very large company, as you know, and we’re now accelerating, our rate of growth is actually accelerating.

What more could investors in Nvidia ask? This was Jensen Huang talking in March. I don’t understand what Jensen Huang is talking about when he talks about Nvidia, hardware, software and all the explosively growing companies like OpenAI and Anthropic working with Nvidia, but I get one thing – it’s exciting; it’s phenomenally exciting.

Something is happening at Nvidia that I can’t get my head around, but it’s important. It is in the quote below.

I think that this chart grows on both sides of it grows at similar rates approximately until the physical AI inflection happens in a few years. And so let’s say, physical AI inflection happens, then the industrial side has to be done on-prem. It has to be done at the edge. It has to be done in location. It has to be done in the factory. Then all of a sudden, that 40% is likely to grow. And I think ultimately, that 40% becomes larger. And the reason for that is because the world’s industries that are related to physical AI is much, much larger than the industries related to digital AI. Something like $70 trillion of the world’s industries, $50 trillion, $60 trillion, $70 trillion requires physical AI because the world is happening not in our laptop, the world happens out where the world is. And so there’s a lot of atom-related businesses that simply can’t be taken care of without physical AI. And so I believe and I hope that, that 40% actually becomes 70%, but both of them are going to be incredibly large because the world is going to produce tokens every single day continuously.

I think this means that currently 60pc of Nvidia’s business is with developers and digital AI, and 40pc is with what he calls physical AI. This physical AI is potentially enormous and poised for dramatic growth in the future.

In addition, Nvidia has big plans to use its gigantic free cash flow to reward shareholders.

Okay. Where we stand right now, it is probably not taking into account the plus sign, not taking account the plus sign, we will probably be at 50% stock repurchases and dividend together as a percentage of our free cash flow. So that’s where we’re starting out. And as you can see, the plus sign is real, and then that does give us an additional opportunity to even do more. The timing of it, again, remember, looking through what we have to do here in the first half of the year with some of our existing commitments, but stay tuned.

Bottom line, we have all this exciting stuff happening and a share price punching decisively through $200. I think Nvidia is off to the races, which is good news for the whole AI hardware and energy sectors.

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