Nvidia – Bringing on the Competition

Nvidia – Bringing on the Competition

Nvidia, the AI chip designer, has had a surge in its share price since the beginning of the year. The company’s share price has increased just over 230% since the beginning of the year. It has been the poster company for investors trying to jump in on the Artificial Intelligence (AI) wave, that has dominated news cycles and conversations over the past year.

Nvidia is renowned for developing the first commercially accessible graphics processing unit (GPU) in 1999. The GPU distinguishes itself from the central processing unit (CPU) by completing less intricate tasks but can do these tasks concurrently. The CPU, on the other hand, can handle more complex tasks but does them sequentially. GPUs have a wide variety of uses such as:

  • Creating visuals for displays on computers
  • Facilitating the computations essential for cryptocurrency mining
  • Contributing to the training of large language models in data centres

Microsoft, Amazon, and Alphabet, owners of the world’s three largest cloud services providers, have been acquiring Nvidia’s premium GPUs for advancing the next phases of AI application development. These high-end chips come at a substantial cost, with Nvidia’s flagship H100 chip priced at approximately $30,000 each. In Q3 2024, Nvidia gross margin reached 74%: a significant increase from the 56% recorded during Q3 2023. The quarter’s revenues soared to $18 billion, marking a remarkable growth of over 200% compared to the same period last year. Furthermore, Nvidia’s net income reached $9 billion for the quarter, indicating a 1200% increase compared to the same quarter last year.

The substantial costs associated with Nvidia’s high-end GPUs have prompted Microsoft, Amazon, and Alphabet to seek alternatives. Consequently, these tech giants have either already crafted their own chips or are in the process of developing such solutions for use in their data centres. Backed by substantial capital reserves, these companies are investing in chip development endeavours aimed at narrowing the performance gap with Nvidia’s offerings. Nvidia is not stepping back though. The company claims that its upcoming flagship H200, slated for release next year, boasts nearly double the capacity of its predecessor, the H100 GPU.

The competition is further intensifying as traditional semiconductor companies globally vie to capitalize on the AI trend. The race is notably heightened by the US ban on exporting high-performing chips to China, serving as a catalyst for Chinese companies to bolster their presence in the AI chip market. The race is on. As it stands, Nvidia is in the lead but there are many other factors that could favour other winners.

Nvidia, Microsoft, and Amazon are held in the Lunar BCI Worldwide Flexible fund. They are also held by Lunar Capital’s Offshore Portfolio clients.

Key Indicators
Index / Fund / Rate
Start of Year
Last Week
This Week
% Change YTD
Index / Fund / Rate
Lunar BCI WW Flexible Fund
Start of Year
141.43
Last Week
176.17
This Week
182.99
% Change YTD
29.39% Lunar Capital increasesymbol
Index / Fund / Rate
JSE ALSI
Start of Year
73 049
Last Week
73 921
This Week
75 712 Lunar Capital increasesymbol
% Change YTD
3.65% Lunar Capital increasesymbol
Index / Fund / Rate
NASDAQ Composite
Start of Year
10 467
Last Week
14 125
This Week
14 251 Lunar Capital increasesymbol
% Change YTD
36.15% Lunar Capital increasesymbol
Index / Fund / Rate
S&P 500
Start of Year
3 840
Last Week
4 514
This Week
4 559 Lunar Capital increasesymbol
% Change YTD
18.73% Lunar Capital increasesymbol
Index / Fund / Rate
Prime Lending Rate
Start of Year
10.50%
Last Week
11.75%
This Week
11.75%
% Change YTD
11.90% Lunar Capital increasesymbol
Index / Fund / Rate
USD/ZAR
Start of Year
16.98
Last Week
18.34
This Week
18.77 Lunar Capital increasesymbol
% Change YTD
10.54% Lunar Capital increasesymbol
Index / Fund / Rate
EUR/ZAR
Start of Year
18.44
Last Week
20.00
This Week
20.53 Lunar Capital increasesymbol
% Change YTD
11.33% Lunar Capital increasesymbol
Index / Fund / Rate
Brent Crude ($'barrel)
Start of Year
85.95
Last Week
80.50
This Week
80.26 Lunar Capital stocktake arrow down
% Change YTD
-6.62% Lunar Capital stocktake arrow down
Source: Iress

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Disclosures
Lunar Capital (Pty) Ltd is a registered Financial Services Provider. FSP (46567)
Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/
Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/
The Lunar BCI Worldwide Flexible Fund Fact Sheet  can be read here.
This stocktake is prepared for the clients of Lunar Capital (Pty) Ltd. This stocktake does not constitute financial advice and is generated for information purposes only.

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