Hot Picks: The most bullish analyst on Nvidia
Following Nvidia Corp. reaching a new market capitalization threshold, experts say some Canadian companies and those with large amounts of data are poised to benefit from AI enthusiasm.
Nvidia hit a US$1 trillion market capitalization Tuesday, becoming the first chipmaker to do so. The company produces specialized chips capable of powering AI-related products.
“I think it's shocking that in after-hours [trading] and less than an hour [after the market opened], Nvidia basically from a market cap perspective grew an entire AMD Inc. plus an Intel Corp….on the back of [the] AI and machine learning outlook for the market,” Keith Witek, the chief operating officer at Tenstorrent Inc., said in an interview with BNNBloomberg.ca Tuesday.
Witek said he thinks the market reaction speaks to a broader enthusiasm for the potential of AI in the minds of investors
“Today we're seeing a lot of attention to Nvidia and clearly the stock price of the company is reflecting that attention,” Pedro Palandrani, a vice-president and director of research at Global X ETFs, said in an interview with BNNBloomberg.ca Tuesday.
However, Darren Sissons, a partner and portfolio manager at Campbell, Lee & Ross, said in an interview with BNNBloomberg.ca Tuesday that the strong market reaction toward Nvidia took him by surprise.
“I just don't think that you can get the advantages required of an AI-type format with just a chip,” Sissons said
Additionally, Sissons said he believes the largest upside will come in the form of software applicable to AI and if the market is as big as projected, other companies will enter the space.
“In terms of Canada, we have a fairly rich software environment, so we can clearly develop capabilities to augment AI in this country,” he said.
“When you think about all of the big Canadian companies, I think you really need to be talking about vertically integrated companies here, not so much the horizontal companies, because they will be less data-rich.”
As a portfolio manager, Sissons said he has “some Canadian tech exposure.” He said he would be surprised if Canadian companies like CGI Inc. and OpenText Corp. are not looking to integrate AI in some way to improve solutions.
“And if they can do that, they're going to charge a commercial premium for doing that,” he said.
Since the launch of ChatGPT in November of last year, Palandrani said it “feels like a lot has happened in the AI field recently.”
He said Shopify Inc. is an example of a Canadian company leveraging AI.
“Shopify is one of those companies that [has] really tried to show investors and perhaps their own user base and clients that they're also going to leverage generative AI solutions,” he said.
Palandrani said the Ottawa-based company is data-rich, given its e-commerce operations and “internet-centric approach.”
“They actually started to announce what they call Shopify Magic that essentially leverages a generative AI technology,” he said.
Shopify Magic was launched in April and allows merchants to use AI to generate things like product descriptions.
BROADER AI TREND
Witek said he views Nvidia’s recent market gains are indicative of a broader investment trend and that historically when new markets emerge “there was always kind of a big player that captured the mindset and the mind share.”
He said an example of this can be seen with Apple, who was an early mover on smartphones, but later had to compete with Samsung.
“All the customers are going to be saying ‘we want alternatives and choice.’ There's going to be niches that Nvidia cannot serve,” Witek said.
With Nvidia currently being the large player in an emerging market, Witek said “taking the scraps off the table” could entice investors, smaller firms or private equity groups.
“I don't think anybody's going to penetrate it [Nvidia’s market share] to the tune of being a trillion-dollar company by the end of the year, but there's going to be a lot of people that can penetrate into this market on the back of what they've created and the momentum that they have,” he said.
Tenstorrent and LG Electronics Inc. announced in a news release Tuesday a deal to collaborate on building new generations of AI and video codec chiplets. The chiplets will potentially be used to power LG’s TV and automotive products.
Future integration with AI will not take on a one-size fits all approach, said Sissons.
“It's really just an extension of big data and the ability to harness and now analyze that data as far as I can see,” he said, adding that companies with large databases will benefit the most.
There are three types of organizations that stand to benefit the most from generative AI, Palandrani said.
The first is hardware manufacturers, especially those in the semiconductor or GPU industry, he said.
“Number two, companies with a lot of data and these are usually your large mega-cap or mega tech incumbent and I would really consider Shopify to be within this category,” Palandrani said.
The third category is companies that have the talent to leverage AI technologies.
“I think companies with data, it could be financial service providers, it could be health care-related companies are going to start working on partnering with these internet companies that do have the technology in place to leverage all of this data,” Palandrani said.