To The Moon

Nvidia Just Made Two Moves That Could Push Its Stock to the Next Level

$NVIDIA Corp(NVDA)$   has just made two aggressive and defensive moves that its shareholders will appreciate. The company unveiled a new 72-billion-parameter large-language model (NVLM) and announced a strategic partnership with Accenture with a focus on AI consulting and services.

Nvidia finds itself in a unique position among its peers. With its growth and dominant market share, the company is squarely in the sights of the entire tech industry. Rival chip makers are eager to dent Nvidia's 90% market share of data-center GPUs and AI systems. Meanwhile, less-obvious competitive challenges are coming from the likes of OpenAI, Anthropic and $Meta Platforms, Inc.(META)$  .

Many of Nvidia's largest original-equipment manufacturers have feasted off the demand for Nvidia, but some are finding out that reselling Nvidia may not be as profitable for them as it is for Nvidia. Cloud providers, OEMs, and independent software vendors will all have to ask tough questions about long-term viability. Nvidia could face a situation where it must aggressively protect its turf, while continuing to grow revenue at a prodigious clip.

Nvidia's next frontier

Nvidia's massively powerful open-source AI model, NVLM, competes with proprietary systems from industry leaders OpenAI and $Alphabet(GOOG)$  . Think of NVLM as one more layer in Nvidia's "AI full stack" to reinforce the company's competitive moat. The model not only is intended to enrich Nvidia's enterprise solution but marks its entry into the open-source large language model AI game to compete with Meta and, potentially, Anthropic, OpenAI and others.

Nvidia is also committed to making its model development more transparent than some of the best-known black-box models by sharing the model weights and training code. Because so much work is yet to be done on AI safety, I imagine this will be met with positive marks from enterprise customers.

With the market lauding Meta for its progress on Llama, Nvidia is now entering the same space. Its early numbers reflect a product that can compete with Llama 405 in certain areas and already as language at a level like GPT-4o. This certainly puts some question marks around OpenAI - especially after its recent $6.6 billion funding round that gave it an astronomical $157 billion valuation.

Nvidia and Accenture make a strong pair

The Nvidia-Accenture accord makes a lot of sense. It's the kind of pivot a company like Accenture makes to stay ahead of disruption risk, and the investment is validated by a handful of numbers that attest to its wisdom, including:

-- Accenture delivered about $100 million in revenue from Generative AI in 2023.

-- In 2024, that figure is expected to jump to $900 million in the fiscal year, with bookings exceeding $3 billion.

-- Futurum Intelligence AI Services research from 2024 identified competence and capacity as the top two challenges for enterprises implementing AI and selecting a systems integrator/consultant.

-- This year is expected to see a three-fold jump in multimillion-dollar gen-AI POC.

The long view here is that time-to-value considerations are critical: Technology is evolving at an unprecedented cadence and IT/consulting resources must move to supporting AI implementations at scale.

$Accenture PLC(ACN)$   is making investment here and the work it does around Nvidia should largely translate across other hardware/software ecosystems, making this not only a huge bet on Nvidia but on AI.

Meanwhile, Nvidia's pie is expanding as massive demand for AI chips and cloud-accessible AI infrastructure grows. Nvidia's digital moat is increasingly fortified - and its shareholders can be too.

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