TECH NEWS – A supplier CEO says Nvidia may not be able to enjoy rising stock market and financial results in the longer term…
Doug Lefever, CEO of Advantech, a Japanese supplier of semiconductor (chip) test equipment, said in an interview with the Financial Times that Nvidia could overcome the slowdown (caused by a reduction in spending on AI by big tech companies) by increasing its market share of smartphones with artificial intelligence. Spending on AI can go in cycles, and if the current cycle ends, it could send shockwaves through the industry.
This year’s spending has been aimed at providing companies with the capacity to train data centers and test models. These data centers have changed the paradigm in terms of size and consumption, which is why many are considering alternative energy sources (nuclear).
According to Lefever, the use of AI on smartphones can help the supply chain weather cyclical downturns. This period may not last long, but he refrained from comparing current AI spending trends to a bubble, as he believes the term suggests that this spending will disappear. While consumer AI devices are unlikely to use Nvidia’s products, their models and calculations should be facilitated by data centers and related infrastructure using GPUs. If the smartphone AI killer app (i.e., the program that sells the product) is born, the resulting surge in demand for AI hardware could help offset the cyclical decline in AI data center spending by large enterprises.
Although a slowdown in AI spending is not on the minds of many investors in 2024, some are concerned about the impact of competition on chip designer Nvidia’s sales. The company’s Blackwell GPUs lead the industry in performance and are considered a niche product, though they are quite expensive. Because of the supply shortage, large companies have diverted some of their spending to rivals such as Broadcom and Marvel, or to designing and developing their own AI processors.
Nvidia (whose shares are up 859% since the start of 2023) is no stranger to the turmoil in the GPU market. Its shares fell 50% between late 2018 and early 2019, after a sluggish bitcoin market caused miners to dump their used GPUs on the market. This affected demand for Nvidia’s GPUs, causing the company to lose more than $23 billion in market capitalization.
The question is how turbulent the market will be.
Source: WCCFTech
