MW Why Nvidia's championship season has all the makings of an AI dynasty
By Cody Willard
Similarities abound to Michael Jordan and the Chicago Bulls - only this time for Nvidia bulls
During the 1995-'96 NBA season, Chicago Bulls tickets were impossible to get, but my father and I were able to make it to one of their games. That was the only time I ever saw Michael Jordan play in person. Oh, and that was one of the only two games they lost at home that year.
Nvidia $(NVDA)$ reminds me of that great Bulls team and that historic championship season. Nvidia's GPUs are tech's hottest ticket, with demand far exceeding supply. Like the Bulls in the Jordan era, Nvidia keeps shattering records.
The Bulls back then, like Nvidia now, continually broke records, ran up massive scores, and repeatedly topped the stratospheric expectations set for them. But like the game I happened to catch that year, nobody gets out without a loss here and there.
Nvidia might be on track for a 'three-peat' - like the Chicago Bulls pulled off back in the '90s.
The question about Nvidia's earnings report on Wednesday isn't whether the company will beat and raise, but by how much (keep in mind that the stock won't necessarily rise following the report).
Nvidia is in the midst of an historic run, but it wouldn't be surprising if the company follows up its record-setting 2024 season with continued strong growth in 2025 and 2026 as the AI revolution powers on. In other words, Nvidia might be on track for a "three-peat" like the Bulls pulled off back in the '90s.
Keeping the analogy going, if Nvidia is the Bulls, then Chief Executive Jensen Huang is Michael Jordan. Huang had a vision for parallel computing using graphics processing units (GPUs), and he invested billions of dollars in developing Nvidia's Compute Unified Device Architecture - more commonly known by its acronym, CUDA - back when nobody was even thinking about AI.
Just like those stories of Jordan playing his older brother every day until he could beat him, believing that one day he would be one of the greatest players of all time, Huang put in the effort (and dollars) to build out Nvidia's AI platform way before it became evident that AI could be a profitable business. Now it has a platform that no one can catch.
And in case you doubted whether Nvidia really is to the AI revolution what the 1995-'96 Bulls were to professional basketball, consider what we've seen since "the ChatGPT Moment" occurred in November 2022.
Since the release of ChatGPT, we've already seen the release of literally dozens of competitor large language models, including Meta Platform's $(META)$ Llama, Anthropic's Claude, Alphabet's $(GOOGL)$ $(GOOG)$ Gemini, and x.AI's Grok, which have similar if not better performance than OpenAI's ChatGPT. LLMs have essentially become commodities.
Clearly, Nvidia is the key to the success of AI, and as more and more companies invest tens of billions of dollars into AI, Nvidia will only continue to succeed. Moreover, all of Nvidia's largest customers - including Microsoft $(MSFT)$, Meta, Amazon.com $(AMZN)$, Tesla $(TSLA)$, Alphabet and x.AI. - continue to place orders with the company and are open about their plans to continue ramping their capital expenditures over the next year or two.
There are sure to be a few issues that will come up on Nvidia's earnings call. One will be the rumored delay of Blackwell and its overheating issue. Obviously, having design issues with the chips this late in the game could be problematic, but Nvidia will likely get this figured out quickly and it's unlikely that any of the company's customers will cancel orders of Blackwell because of this reported issue.
There may also be a question about Super Micro Computer $(SMCI)$, which is one of Nvidia's largest distributors and was recently accused of fraud, saw its auditor resign and is now facing potential delisting from the Nasdaq.
Further, Huang most certainly will face a question or two about whether he sees any potential backlash from the future Trump administration's proposed China tariffs and escalating tensions over Taiwan.
While these are substantive issues in the near term, they don't change much at all for Nvidia in the long run (the only caveat being if China were to actually take over Taiwan and disrupt Nvidia's supply from Taiwan Semiconductor Manufacturing Co. $(TSM)$).
Nvidia is empowering perhaps the biggest tech revolution since the internet, and this could be the start of a long dynasty like the Chicago Bulls had - only this time for the Nvidia bulls.
Cody Willard is the founder and CEO of 10,000 Days Capital Management and the publisher of TradingWithCody.com, a subscription trading newsletter offering real-time trade alerts. Willard and/or 10,000 Days Fund LP were net-long NVDA, TSLA, META, GOOG, TSM, and AMZN, and net short MSFT and AMD at the time of publication. Positions can change at any time and without notice.
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-Cody Willard
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November 19, 2024 17:09 ET (22:09 GMT)
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