I am seriously thinking of selling my tiny stake in Nvidia (NASDAQ:NVDA) stock. One reason is personal. At 68, it’s time for me to consider bonds for income and to protect my retirement. But most of it is a sense that the fad for Nvidia stock has become a mania. This has nothing to do with what the company is doing. The idea of an AI training system for robots, suitably dubbed Eureka, is brilliant.
This also shows how Nvidia is moving “up the stack” from chips to operating systems to applications. There are 32 Nvidia analysts, whose mean estimate is for earnings of $3.16 per share, on revenues of $15.19 billion. I’ll take the over. It’s clear Nvidia will dominate the AI age the way the Cloud Czars dominated the last decade. This doesn’t mean Nvidia stock is worth its current price.
The Intel Gambit
The best reason to sell may be today’s “good news.”
Indeed, it could. But how much market share could this take, and at what cost, in terms of time and attention? Who would make these chips? If they’re to be built using the latest equipment, in the newest fabs, the answer is Intel.
Intel holds the key to America’s industrial policy, not Nvidia. Nvidia is a design house. Its hardware is software. Intel is the company that must make the stuff, and they’re working full-out at doing just that in their new fabs. These fabs should start producing wafers in 2025.
Why would Nvidia put that at risk, especially since it can partner on existing AMD designs, based on ARM software. CEO Jensen Huang didn’t just fall of the daikon truck.
Entrepreneurs Become Institutions
The rise of AI and of Intel’s need for government help are forcing the whole industry to think in new ways.
That’s the real message in Huang’s comment to Fortune that, if he had it all to do over again, he wouldn’t. Perhaps it’s that he now realizes he couldn’t.
Nvidia, like the Cloud Czars, is now an institution. It’s a public trust with huge public responsibilities. Managing it is exhausting, requiring a new skill set.
Huang’s era, of swashbuckling CEOs in leather jackets, is giving way to that of Gelsinger, who works alongside government. It’s giving way to a new generation of cloud leaders who must deal with government, and each other, in a cooperative spirit.
Huang sees this clearly. His partner for building new data centers based on Nvidia AI chips is Foxconn (OTCMKTS:FXCOF).
That’s the Taiwanese company that builds the Apple (NASDAQ:AAPL) iPhone in China. Diplomacy is going to be essential for any company seeking to do big things in the future. Nvidia does want to do big things.
The Bottom Line
You won’t find a selling signal in a company’s stock price. There are always reasons to buy the dip. But the new AI era has many unknown unknowns in it. Managing it will require a new kind of tech leader, less a King than a Prime Minister. Apportioning credit, and profit, between the private and public sectors will become more complex. Huang knows this. Investors need to know it too.
Does this mean Nvidia will fail in its mission? No. But it does mean that profitability can’t stay where it is.
As of this writing, Dana Blankenhorn held LONG positions in NVDA, AAPL AMD, INTC, and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.