Market Musings 12/17/2024
Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!
Nvidia may finally have a legitimate challenger after years of being the undisputed #AI chip leader.
So, since Broadcom’s earnings, investors have been buzzing about the potential for custom application-specific #AI chips.
First, what are application-specific chips? As the name implies, it’s a chip designed and optimized for a specific purpose or… application.
Broadcom noted it already has three #BigTech hyperscale customers plus are in the advanced development process with two more. They believe this may be a large new market opportunity potentially worth $60B to $90B by 2027.
So, why does this matter to Nvidia?
Well, Nvidia is currently the #AI chip leader with over $30B in data center revenue just in the last quarter. #BigTech hyperscalers’ wallets have been the driving force behind Nvidia’s surging #AI revenue growth.
While still a little ways out, once ready, #BigTech hyperscalers are likely to start deploying their own custom #AI chips along with Nvidia’s more general-use chips which could lead to a market share hit for Nvidia in the future.
Unsurprisingly, we’ve seen some weakness in Nvidia’s shares since – likely due to some combination of tempering sale outlook expectations and #AI investment rotation. Up to last week, Nvidia supported the lion share of the market with no competition in sight.
While Broadcom’s announcement has shifted the market expectation, we still believe #AI is still in the early stages with a lot of room to grow. There’s likely room for, and will be, multiple players supplying #AI chips.
We’ll see how the #AI trade continues to play out in 2025.
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As of the publish date, Ursa portfolios may own NVDA and/or AVGO. The stocks mentioned in this article may cease to be owned by Ursa portfolios at any point.
The statements, opinions and analyses presented here are provided as general information. This article is the opinion of the author. Anything within this article should NOT be considered an investment recommendation or advice. See Ursa’s full disclosures here.
Original Photo by Pixabay.