NVIDIA Analysis: Stocks at Highest Point in 5 Years. What If the CEO's Prediction Comes True?


What a remarkable turn of events.

In 2021, some of the regional authorities in China conducted a crackdown on cryptocurrency mining.

This resulted in giant mining rigs being exported from the country and, in some cases, literally dumped onto the second-hand computer hardware market and sold for a fraction of their previously useful value.

Given that China’s mining communities made up at the time approximately 70% of all global Bitcoin mining, this was a potential blow to the hardware industry, which provides the components from which these rigs were built.

NVIDIA, a North American manufacturer of graphics cards, is the only traditional hardware component manufacturer which is still a massively capitalised publicly listed company and one of the most popular technology stocks.

Almost all other computer hardware component manufacturers faded into near insignificance when the cloud computing era came. No longer do offices have server farms and vast on-site networks featuring switches and arrays of rack-mounted infrastructure, keeping the everyday operations of the business flowing.

Today, everything is cloud-hosted, and there is no hardware in most offices, nor at most homes, as the mobile-first way of life has been embraced by almost everyone worldwide.

NVIDIA's sudden rebound has been remarkable, considering these two dynamics.

Yes, two years ago, NVIDIA's share price took a nosedive after the ousting of Chinese Bitcoin mining rigs, but it soon rose again as entrepreneurialism took hold in other regions with cheap electricity, such as Kazakhstan and Armenia, where the mining rigs sprung up rapidly very soon after the departure from mainland China, and by that time it was clear to see that the hashrate – the rate at which Bitcoin was being mined – had not dropped at all.

NVIDIA's share price rose once again and has been strong since; however, over the past few days, it has absolutely rocketed.

Indicative pricing only

Right now, after a healthy close of business on Friday, NVIDIA stock stands at around $400 per share at FXOpen. This high value came about after a sudden rise in value on Wednesday last week when the stock went from $305 to $384 in one day.

At the moment, NVIDIA stock is at its highest value in five years, which is a feat rarely achieved by otherwise non-volatile big-cap New York stocks.

This is perhaps because NVIDIA is not resting on its laurels. It would be easy to think of a company that produces graphics cards whose most common use is Bitcoin mining, but that is keeping all eggs in one basket. What if one day, the cryptocurrency developers, who are among the most innovative developers in the world, find a method of mining that does not involve such high electricity consumption or need the use of specific computer hardware components?

NVIDIA is now pushing ahead with artificial intelligence (AI) development, and the company's CEO Jensen Huang has announced that NVIDIA has launched a new platform aimed at helping companies build new AI platforms. That is very clever. AI is suddenly the new big thing, and the VC money is flowing into AI projects set to rival ChatGPT and Google's ingenious system.

By being a technology provider to AI developers, NVIDIA is doing what Toyota did in the automotive industry many decades ago by inventing a whole new type of factory tooling which can be adapted to build new models rather than replaced and then licensed it to other manufacturers who had to pay royalties as Toyota invented the system.

Mr. Huang said last week that "everyone is a programmer now," referring to ChatGPT and other AI systems' ability to generate code based on people just talking to it and explaining what they want.

NVIDIA's share price surge now positions it to become the world's first trillion-dollar semiconductor stock.

Will that actually happen? If the graphics card momentum is maintained and joined by a move into software at a time when AI is taking off, this is a fascinating course to watch.

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