Artificial Intelligence (AI) leader Nvidia (NASDAQ: NVDA) will host the AI Summit 2024 from October 7. The event will bring together leaders from across the industry to see and hear from some of the leading minds in AI. It’s a chance to take a look into the future of this potentially revolutionary technology.
With such a big event coming up, you might be asking yourself: should I invest in Nvidia now? History can give us a clue. Let’s take a closer look at the company.
Nvidia dominates its rivals
There was a time when Nvidia and its old rival, Advanced micro deviceswere neck and neck in their battle to control the gaming market. Overall, there was parity between the company’s two profit and loss accounts. That has changed. After AI reached an inflection point in late 2022, Nvidia dominates AMD, making more in profits than AMD does in total revenue. Take a look at this graph, which shows how monumental the recent shift has been.
That’s what you get when you control 90% of a market as valuable as AI silicon. The good news for Nvidia is that it doesn’t look like the gravy train will stop anytime soon. The message from the rest of the big tech sector, the companies that represent the bulk of the sector, is that their spending is likely to rise in the near future.
This is a race of sorts and none of the major players can afford to be left behind. If AlphabetSundar Pichai CEO said it in the company’s latest earnings call: “The risk of underinvestment for us here is dramatically greater than the risk of overinvestment.” Alphabet expects to spend roughly $50 billion on capital expenditures (capex) this year, up from $32 billion the year before – and it’s not alone.
At this point, the majority of this spending still flows through Nvidia as AMD, Inteland others are struggling to match the power and efficiency of Nvidia’s chips. There is still huge demand for the current generation, and the company’s next generation will likely ship within months. The huge profits Nvidia has made mean it has to spend large amounts of money to maintain its lead. Despite already being ahead, Nvidia outspent AMD on research and development by about two to one last quarter.
What history has to say
This will be the third year in a row that Nvidia will host an AI event in this vein. The company started these events in 2022 with a virtual event focused on speech in AI. 2023 was supposed to be the first year of a full-fledged, multi-day AI summit, but the event was moved online for one day. This year the event will take place in person over three days.
Despite their more modest meeting sizes, both previous iterations led to a nice rise in Nvidia’s stock price. In the week following the 2022 event, shares rose as much as 10%. In 2023 they rose by no less than 6.5%. So will this year’s conference also lead to a jump in the share price? Maybe.
I know this may be a disappointing answer, but the truth is we don’t know for sure. First, two years is a very small sample size from which firm conclusions can be drawn. And even if we had more years to point to, correlation not causal relationship. Just because two things can be linked – like an AI summit and a stock price rise – doesn’t mean anything is happening because of the other.
But the event is an opportunity to remember the power of AI. Instead of thinking about possible short-term stock movements, focus on the company’s long-term prospects. Don’t lose sight of the forest for the trees. This is a company at the top of its game, enabling the adoption of a potentially revolutionary technology.
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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Johnny Rice has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Advanced Micro Devices, Alphabet, and Nvidia. The Motley Fool recommends Intel and recommends the following options: Short November 2024 $24 Calls on Intel. The Motley Fool has a disclosure policy.
Should you buy Nvidia stock as the AI Summit kicks off? History says this will happen. was originally published by The Motley Fool
