There was a time when Nvidia Corporation was expensive for fund managers. I recall an interview I did with Artificial Intelligence Fund Manager Chris Ford two years ago, in which the tech expert said his role in developing “morally good” deep fakes was one of his many accomplishments.
Indeed, the achievements are huge. Nvidia isn’t a household name in the same way as Apple or Microsoft, but it powers much of what we do as technology consumers. Of course, most of what your kids do online will help. Its chips are a central component to millions of the world’s games consoles, and as a result, its influence has spread to cyphertomming and the like.
But Nvidia’s market value has risen and then fallen in recent years – at the end of 2021, shares were close to $330, but now they are worth $131, which means that the capitalization has dropped from $822 billion to $328 billion today.
What went wrong?
Nivea is an American success story. But last year he pointed out that the collapse of global expansion plans was far from over.
As the company plans to buy UK chipmaker ARM, owned by Softbank, the Competition and Markets Authority (CMA) has warned that the £29bn takeover will reduce competition and innovation in self-driving car development and gaming. It was a kind way to say that competitors who rely on ARM may have pulled the rug out from under them. (As a postscript, the UK government is encouraging ARM to list in the UK as the company seeks to go public again.)
The story didn’t end well for Nvidia or the 1,000-ish employees at ARM after it was discontinued in February of this year. After initially announcing the transaction as a “seed of the world’s leading computer company”, both parties were left red-faced.
Other issues weighed on the NVIDIA picture as well. In May of this year, the company agreed to pay a $5.5 million fine for not reporting to the US Securities and Exchange Commission the true contribution of crypto-mining to its bottom line. This is a drop in the ocean financially, but the reputation and impact has been evident.
But that’s still not all. In addition to being embroiled in major control battles, Nvidia has also found itself an unlikely puppet in geopolitics.
In early September, the Chinese government protested against the United States government’s decision to limit the export of powerful processors to the country. The move affects products that include Nvidia’s A100 and H100 graphics processing units, both of which are used to speed up the machine learning process. Nvidia now needs licenses to continue selling.
“US officials have told chipmaker Nvidia that it needs a special license to sell two of its Chinese customers, which are widely used to speed up AI calculations. Financial Times He reported.
Morning star sight
In a recent analyst note published on Nvidia earlier this month, sector strategist Abhinav Davluri said the geopolitical interference by the Biden administration is “disturbing.” That said, considering Nvidia’s offerings, which have a strong consumer base, should stop sounding the alarm.
“Nvidia’s major cloud customers include Chinese companies such as Alibaba, Tencent and Baidu for a variety of applications such as natural language processing, image recognition and deep recommendation engines,” he says.
“In an SEC filing, Navidi said its fiscal third-quarter revenue outlook included about $400 million in revenue for China that may be subject to the new licensing requirement.
“We believe the majority of end-use applications for Nvidia’s Data Center GPUs in China are consumer-centric, and we believe the company should be able to obtain licenses for these customers.”
And as for Chris Ford, his fund has rebranded following new ownership and is now Sanlam Global Artificial Intelligence. But it still holds Nvidia, and over at least five years, the firm has been among the fund’s top-performing contributors, below Tesla, Roku, Alphabet and Netflix (in that order).
Is it game over for Nvidia? Far from it. But the challenging phase is not over yet.