Shubham Sawarkar
NVIDIA, a prominent chipmaker based in Silicon Valley, is poised to sustain the rebound in US stocks this year, thanks to its robust position in the realm of artificial intelligence (AI). However, the rapid advancements in AI are predicted to create a greater number of losers than winners, according to Rajiv Jain, the founder and chief investment officer of GQG Partners, one of NVIDIA’s recent major shareholders.
With its technology powering various AI applications, including the widely recognized ChatGPT, NVIDIA recently achieved a remarkable milestone by becoming the first chipmaker to reach a staggering $1 trillion valuation. This achievement was propelled by investors who flocked to companies expected to benefit most from AI developments.
Jain believes that AI will have a disruptive impact on business models across industries, leading to a higher number of losers than winners. He stated, “In NVIDIA’s context, it [AI] is going to create some winners and losers…more losers than winners.” While acknowledging NVIDIA’s position as an obvious winner, Jain also identified larger tech names such as Alphabet and Meta as potential beneficiaries. GQG Partners invested $2.3 billion in NVIDIA’s shares in the first quarter and has since expanded its stake.
NVIDIA’s shares have surged by an impressive 170 percent this year, contributing $575 billion to the company’s market capitalization. This gain is surpassed only by Apple and Microsoft, which added $721 billion and $654 billion, respectively.
While semiconductor companies are expected to benefit from high entry barriers and strong chip demand, some software and IT services firms might find themselves on the losing side as AI automates certain aspects of their operations, rendering much of their basic work redundant.
Drawing parallels to the dotcom boom, Jain cautioned that predicting winners in this AI-driven landscape is challenging. He highlighted the example of Amazon’s unexpected triumph, noting that identifying the winner was not obvious at the time. Jain emphasized that Amazon’s transformation over the years further complicated the prediction process.
GQG Partners, founded by Jain in Florida seven years ago, recently experienced significant growth, with first-quarter inflows amounting to $5 billion and its total assets reaching around $100 billion for the first time.
The firm garnered attention earlier this year when it invested $1.9 billion in the Indian conglomerate Adani Group after the company faced a substantial decline in market value due to a US short seller’s attack. GQG Partners has since increased its stake in Adani Group companies.
Jain’s decision to rebuild the firm’s stake in NVIDIA was triggered by the introduction of the artificial intelligence chatbot ChatGPT, which he believes will drive a substantial increase in earnings for NVIDIA. While GQG initially invested in NVIDIA in 2017, it divested its holdings 18 months ago due to concerns over the company’s high valuation.
The launch of ChatGPT in November generated a surge in demand for NVIDIA’s H100 chips, which CEO Jensen Huang described as “the world’s first computer [chip] designed for generative AI.” These chips enable AI systems to swiftly generate human-like text, images, and content.
Last month, NVIDIA’s sales forecasts surpassed Wall Street’s expectations by more than 50 percent, indicating strong momentum for the company.
Jain highlighted a divergence within the technology sector, with profitable technology giants gradually detaching from loss-making entities. During the final phase of a bull market fueled by pandemic stimulus, these profitable technology companies, which constitute significant portions of stock market indices, experienced significant upward momentum.
“There was a lot of delusional thinking in 2021, but there are fewer delusionists now,” Jain commented. “Quality growth within the tech side is back in the frame.”
However, Jain also identified a potential obstacle for NVIDIA—the ability to meet demand. He expressed concerns about companies missing earnings due to an inability to fulfill customer demand, which he believes is the most significant challenge NVIDIA currently faces.
As NVIDIA continues to drive innovation in the AI space, its success is poised to be sustained. Nevertheless, the transformative power of AI will likely create a complex landscape where winners and losers emerge.
