Nvidia Stock could be in for a tougher 2024 after these two recent developments

By | December 20, 2023

algorithms for investing in artificial intelligence

algorithms for investing in artificial intelligence

Prepare the crown Nvidia (NASDAQ: NVDA). The high-flying stock will almost certainly be the best performer of the S&P500 for 2023. It’s been a truly remarkable year for Nvidia thanks to rising demand for its graphics processing units (GPUs).

However, don’t automatically assume that this momentum will continue into the new year. Nvidia shares could be in for a tougher 2024 after two recent developments. Here’s a look at each and why they could be a problem for Nvidia.

1. New AI chips on the block

Nvidia has so far held a dominant position in the AI ​​chip market. There simply hasn’t been much competition. However, that is changing.

Last week, Intel (NASDAQ: INTC) has announced plans to launch its new Gaudi3 chip in 2024. Gaudi3 is specifically designed to run generative AI applications. It should compete with Nvidia’s H100, the current market leader in powering AI apps running on server farms.

Intel stated in a press release that it has “seen rapid expansion of its Gaudi pipeline due to growing and proven performance improvements, combined with highly competitive TCO [total cost of ownership] and praise.” The company believes it can increase its market share in the AI ​​accelerator market next year thanks to the introduction of the Gaudi3 chip.

But that is not everything. Intel is also launching its new Core Ultra chip for running AI apps on personal computers. CEO Pat Gelsinger said: “We’ve seen the excitement around generative AI, the star of the show for 2023.” He added: “We think the AI ​​PC will be the star of the show in the coming year.”

2. Gemini’s silent diss

Alphabet‘S (NASDAQ: GOOG) (NASDAQ: GOOGL) the announcement of its new Gemini large language models (LLM) on December 6 deserved all the attention it got. The most powerful version of the new LLM model, Gemini Ultra, defeated the current state-of-the-art AI models on 30 out of 32 benchmarks. It even outperformed human experts on the MMLU (massive multitask Language Understanding) test – the first AI system to do so.

What didn’t get as much attention, however, was another new product. Google DeepMind CEO and co-founder Demis Hassabis revealed the launch of Cloud TPU v5p in a blog post. The new tensor processing unit (TPU) chip is specially designed for training AI models. Hassabis stated that it is “the most powerful, efficient and scalable TPU system yet”.

Importantly, Google trained Gemini using its own TPUs. There was no mention of Nvidia’s GPUs at all. The introduction of Cloud TPU v5p could mark a significant advancement in Google’s AI chip technology.

Certainly, Google remains closely tied to Nvidia. In August, the two companies announced an expansion of their partnership to bring Nvidia’s generative AI technology to Google Cloud customers. However, it is clear that Google does not want to be completely dependent on Nvidia.

The potential impact on Nvidia

Do Intel’s launches of the Gaudi 3 and Core Ultra AI chips and Google’s introduction of its Cloud TPU v5p mean that Nvidia is in serious and impending trouble? No. There’s no reason to believe that Nvidia’s GPUs won’t remain the gold standard for AI apps for a while.

However, investors are counting on Nvidia to continue to achieve enormous growth in the coming years. Anything that disrupts that growth could weigh on Nvidia’s stock price.

Nvidia is subject to the laws of supply and demand. The company’s rising profits (and stock price) are due to fast-growing demand for its GPUs, combined with a limited supply of the AI ​​chips. Recent moves by Intel and Google could reduce demand for Nvidia’s GPUs to some extent.

Again, I don’t expect Nvidia’s momentum to be completely derailed as a result of these new chips. However, it’s reasonable to expect Nvidia to face a tougher challenge in 2024 than it did in 2023. Don’t expect its shares to come close to tripling (and more) as they have this year.

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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Keith Speights has positions at Alphabet. The Motley Fool holds positions in and recommends Alphabet and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 calls $57.50 on Intel, long January 2025 calls $45 on Intel, and short February 2024 calls $47 on Intel. The Motley Fool has a disclosure policy.

Nvidia Stock could be in for a tougher 2024 after these two recent developments originally published by The Motley Fool

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