Nvidia’s AI Boom: How to Profit Before the Inevitable Bust

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Nvidia (NASDAQ:NVDA) stock is to the 2020s what Apple (NASDAQ:AAPL) was to the 2010s, what Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) was to the 2000s, and what Amazon (NASDAQ:AMZN) was to the late 1990s.

NVDA stock has won the Great Game, creating the “Next Big Thing.” That’s Generative Artificial Intelligence (GenAI) and, eventually (but not yet) Artificial General Intelligence (AGI).

With its leadership defined, and the future so close, Nvidia held its developer conference in San Jose this week to prove it’s worth the $2.3 trillion valuation investors now have on it.

Were we not entertained?

The Blackwell Era

GenAI, and AGI, require brute force calculations on huge databases, which process that data through learning models. The faster those calculations happen, the more like your brain the result can appear to be.

Nvidia’s latest step in this journey is Blackwell, a platform built on Nvidia’s existing Hopper system. Introduced by CEO Jensen Huang at the San Jose hockey arena, it was followed by a developer conference and trade show at the nearby convention center.

The new platform is named for statistician David Blackwell, the black son of a railroad worker. His name is on the Rao-Blackwell theorem, a key tool in modern computer science. Hopper is named for pioneer computer programmer Grace Hopper.

Yeah, it’s woke. Get over it.

Executives from all major vendors were at the show, admiring the machines like scouts before a first round quarterback. They filled the halls with praise and applications, pledging their fealty to the new King of AI.

The AI Market

For NVDA stock, GenAI is a natural outgrowth of its early niche in video games. The difference is in the complexity of the software that lies in front of the rendering. Now we’re talking about using corporate and national data warehouses, queried for inferences among data points, not some kid waiting for their orc to slay a dragon.

Nvidia and the AI market have lifted the entire American economy. It might otherwise be slowing down as the stimulus of the COVID era is removed.

We’re still in the “Goldilocks” period for AI. Micron (NYSE:MU) has sold out its 2025 allocation of high-speed memory chips.  Any IPO with an AI theme sells out quickly. Even IBM (NYSE:IBM) is a hot stock.

In this market, it doesn’t matter whether Nvidia is overvalued or undervalued. AI is the market, and Nvidia is AI.

The Hype Train

Unlike the dot-com era, where people could see the Web sites they were bidding on, AI investment isn’t about what exists today. It’s about what’s coming, Automated General Intelligence (AGI). Huang says that’s five years away, meaning the hype will continue.

By 2030, Huang predicts, the virtual and physical worlds will be fused, and the Internet rearchitected. It’s that need to rebuild everything that is driving the industry. It’s happening first in cloud data centers and will then move to clients and the Internet itself. The result will be networked software worlds that feel real and think as fast as you do.

The Bottom Line

Investors laughed at Meta Platforms (NASDAQ:META) CEO Mark Zuckerberg for investing billions in his “metaverse” a few years ago.

They’re not laughing at Jensen Huang. That’s because Nvidia sells the hardware, software, and standards that make Zuckerberg’s dream possible.

AI has become the tech story of the decade. What investors need to watch for are misconceptions, phony claims, unnecessary fears, and Fear Of Missing Out. These will turn today’s AI boom into a bubble and, in time, bust the market.

I believe that bust is necessary before AI becomes a world-changing tool. The trouble is that hype is where the big profits are, if you get out before the crash. But the crash is coming. Hypefests like this week’s Nvidia Developer Conference bring it a little bit closer.

Buy now, but be ready to sell when the hucksters get in. I’ll be on the lookout for them.

As of this writing, Dana Blankenhorn had LONG positions in NVDA, AAPL, GOOGL, and AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his free Substack newsletter.

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