Blackwell GPUs are about to take the world by storm and no one can stop talking about it. The most powerful GPUs in the world will be ready for ramp-up by mid-2025, but then what? Most of the revenue that Blackwell will generate should already be priced in. So why all the excitement? We believe it is not the GPU itself, but the penetration into more markets that will drive Nvidia’s growth. However, no one is talking about the significance of these markets.
Let’s consider military spending as an example. We already know that China and the US are at loggerheads, trying to take a lead in AI. The reason is easy to understand. If one country takes the lead in AI, it is likely to have a superior military, which would then have severe implications for the other. But what if, in pursuit of this superiority, there was an arms race? What if both countries started spending massively to build their own AI-enabled defense systems?
Any sort of arms race will put AI chip makers at the forefront. Military spending has already increased manifolds in the last two years, with the Department of Defence handing out way more AI-related contracts than usual. But despite this increase, the spending is still only a few billion dollars.
The Russia-Ukraine war has also proved that autonomy and AI are the future of warfare. Just like the Atomic Bomb changed the rules of global conflicts, it will be an AI arms race that will determine how wars are fought in the next decades. Imagine if every country in the world, every military in the world, and every private defense contractor in the world wants to buy Nvidia’s chips. The resulting spending will be gigantic, and Nvidia should experience astronomical gains from this.
Then there is the matter of using AI for governance. Elon Musk’s Department of Government Efficiency (DOGE) is working on making government operations leaner. AI and autonomy can do this, which is why Elon Musk is the perfect man for this job. Nvidia’s Omniverse platform provides the ideal foundation for creating digital twins of government buildings around the country. The US federal government owns over 300,000 buildings across the US. Imagine the improvement in efficiency if they were run by creating digital twins through Nvidia’s Omniverse. The improvement in efficiency will be massive. But most importantly for investors, Nvidia will again receive astronomical returns.
While Blackwell takes the limelight, Nvidia investors shouldn’t pay heed to the supply chain issues. The Nvidia growth story is about to kick off its next phase of growth.
Nvidia is 5th on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 193 hedge fund portfolios held NVDA at the end of the third quarter which was 179 in the previous quarter. While we acknowledge the potential of NVDA as a leading investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
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