Maria’s Note: Maria Bonaventura here, senior managing editor of Inside Wall Street.
Editor Nomi Prins is about to go live with an urgent briefing, The AI Ultimatum, to showcase one of the winners of what she calls AI’s “take-off” phase.
It’s a tiny company that is trading for only about $0.26. But a major announcement could come at any point – even as soon as 5 p.m. ET today – and send its price soaring.
Nomi will share the details of this fast-breaking situation at her briefing, The AI Ultimatum, in just a few hours.
It’s going live at 11 a.m. ET. So if you haven’t yet, be sure to save your spot with one click here. Then read on for more on what’s at stake as AI goes mainstream, from Inside Wall Street analyst Clint Brewer…
If you need evidence that the dawn of an artificial intelligence (AI) boom is here, look no further than Nvidia’s second-quarter earnings last week.
The company shattered expectations on both the top and bottom lines.
Sales of $13.5 billion easily topped estimates. And earnings per share were 29% higher than what Wall Street analysts were expecting.
With the surge in profits, the company even announced a new $25 billion stock buyback program.
Now, it’s tempting to point out Nvidia’s stock price jumped to new highs… Then quickly gave back all the gains (and then some) following the earnings release.
It almost feels like the AI-hype cycle is over just as quickly as it began. After all, we’ve even warned you about chasing over-extended AI stocks like Nvidia.
But a look closer at Nvidia’s results shows that we’re only at the dawn of the AI-driven boom that’s about to impact other companies. And the early movers on AI stand to capture a massive advantage.
Today, we’ll look at the clues from Nvidia’s report that show AI is about to go mainstream.
The Race Is On for AI
To train and run AI algorithms, you need massive amounts of computational power… and money.
That’s because developing and training AI applications relies on expensive computing equipment like graphics processing units (GPUs) and servers that power AI algorithms.
That’s where Nvidia’s most recent earnings report offers clues.
One key figure in the report shows that companies are spending billions of dollars to grab the most advanced processors available to develop AI applications.
I’m talking about Nvidia’s data center revenues. That’s the segment that will capture most AI-driven demand for its processors.
The chart below shows the company’s quarterly data center revenue…
Sales ballooned to $10.3 billion in this most recent quarter – a 171% jump from a year ago. Nvidia’s outlook suggests another 170% increase in total sales this quarter compared to last year.
That shows the race is on to develop AI applications, and companies are scrambling to stay on the cutting edge of technology.
For example, Elon Musk just revealed that Tesla is firing up a 10,000-unit NVIDIA GPU cluster. Each unit costs around $30,000… for a grand total of $300 million. That cluster will help Tesla train its fully autonomous self-driving program.
And it doesn’t end there. Tesla is spending well over $1 billion on its “Dojo” supercomputer to train and advance its AI algorithms.
During a recent conference call to discuss earnings, Musk said that “in order to copy us, you also need to spend billions of dollars.”
That comment was linked to Tesla’s Dojo supercomputer, and it highlights a stark reality facing companies.
You either invest the time and resources now to incorporate AI, or you’ll be left by the roadside.
And that’s just one example.
Overall, companies are projected to double their spending on AI over the next three years to $300 billion… because for them, it’s a matter of survival.
Adapt or Go Out of Business
In this modern era, consumers are taking on new technologies at an ever-faster rate.
For instance, it took the telephone a few decades to reach 50% of households. Cell phones achieved the same rate in less than five years, according to a study in the Harvard Business Review.
So for corporations operating across various sectors, keeping up with AI is a matter of survival. History is littered with companies that failed to change with the times.
Remember Blockbuster and K-Mart? They failed to keep up with the innovations brought on by Netflix and Amazon.
Companies face the same existential threat today if they fall behind in the race to develop AI. It could be the biggest distortion yet.
Meanwhile, the fruits of AI’s advantages could deliver windfall profits for those companies moving early to adapt.
In fact, Nomi is about to go live with an urgent briefing, The AI Ultimatum, to showcase one of the winners for this coming AI wave.
It’s a tiny company that is trading for only about $0.26.
But a major announcement could come at any point – even as soon as 5 p.m. ET today – and send its price soaring.
That’s because, according to Nomi, one of the biggest organizations in the world missed the AI frenzy. And now, they’re scrambling to catch up… to the tune of a just-announced $826 billion spending spree.
She’ll share the details of this fast-breaking situation at her briefing, The AI Ultimatum.
It’s going live at 11 a.m. ET. So if you haven’t yet, be sure to save your spot with one click here.
Best regards,
Clint Brewer
Analyst, Inside Wall Street with Nomi Prins
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