TOP STORY
🤖 Nvidia Unveils 'Revolutionary' AI Advancements at CES

📊 It was another exciting week in the stock market with Meta CEO Mark Zuckerberg going on Joe Rogan, TikTok getting closer to a ban in the US, Quantum stocks taking a dive, and of course, the story that dominated headlines: Nvidia CEO Jensen Huang’s exciting announcements at the Consumer Electronics Show (CES).

📉 But before we dive in, let’s discuss the market as a whole, as this week we saw a dip across the indexes:

• S&P 500: -1.1%

• Nasdaq 100: -1.2%

• TSX: -1.6%

• Bitcoin: -7.4%

👷 The main cause of the drop was a ‘blowout jobs report’ in the US on Friday, which showed the economy added a massive 256,000 jobs in December - nearly 70% higher than the 153,000 expected.

😰 While this is good news for the economy as a whole, it’s bad news for stocks as a stronger-than-expected economy means the Fed has less reason to cut interest rates.

🎯 Looking at the CME FedWatch tracker, we can see the direct impact of the jobs report on interest rate odds:

• Odds of no interest rate cuts for the year rose from 13.4% → 25.9%

• Odds of only one cut rose from 32.4% → 39.8%

• Odds of a rate cut in the Fed’s next meeting in January fell from 10.7% to 6.4%

🔍 With this broader market context in mind, let’s take a deeper look at the company that dominated the headlines this week: Nvidia ($NVDA).

🤔 Despite what some are calling ‘revolutionary’ announcements, Nvidia ended the week down 3% - likely driven in large part by the overall market drop on Friday. But what were these announcements, and just how game-changing will they be?

🤖 Nvidia’s Announces Revolutionary $3,000 Mini Computer for AI Developers

The most significant announcement from Nvidia was its surprise reveal of ‘Project Digits.’ In the words of Huang:

Supercomputers are nothing new, but what makes this one really special is the price point. At only $3,000 - the computer can reportedly handle enough data to train the most cutting-edge models, which previously would have cost $100M.

If that seems wild, it did to many analysts as well:

So the tech is cool, but what does this mean for investors? Well many believe this may be Nvidia’s first move into the $50B market for PCs, and when asked about it Huang seemed to say ‘yes’ without saying it directly, simply replying:

😎 Now, before diving into some of the other exciting Nvidia announcements and what all this means for the stock, a quick word from this week’s sponsor Guardian Capital!

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TOP STORY CONTINUED
💡 Other Interesting Nvidia Announcements and Impact on the Stock

Project Digits wasn’t the only massive announcement at CES. Here are some of the other most notable, along with analyst thoughts on what all this means for Nvidia’s stock:

🏆 Nvidia CEO Unveils New Cosmos Model, Calling it “the ChatGPT Moment for Robotics”

Every year, CES has a variety of awards such as Best Laptop, Best Smart Home devices, and more, and this year Nvidia took home the prize for both the ‘Best of AI’ and the ‘Best of CES’ with its new Cosmos Foundation Model which Jensen Huang called the “ChatGPT moment for robotics” and the “the world’s first world foundation model.”

Cosmos is a generative AI platform specifically designed for physical AI systems, providing tools for simulation, training, and decision-making - trained on 20 million hours of real-world robotics and driving videos. The platform has the capability to “ingest text, image, and video prompts and generate virtual world states” and is already being used by leading robotics companies to drive breakthroughs in physical AI systems like self-driving, robots, and even smart-glasses.

Nvidia was also celebrated by the tech community for making Cosmo accessible through open-model licenses - signifying Huang’s vision of democratizing AI development and empowering the global developer community.

🚘 The Launch of DRIVE Hyperion AV: An “End-to-End Autonomous Driving Platform”

On the theme of self-driving, Nvidia also launched the DRIVE Hyperion AV platform, an "end-to-end autonomous driving platform," that includes the SoC, sensors, safety systems, and a DriveOS operating system that car manufacturers can use to build their autonomous vehicles.

If Cosmos is focused on the development phase, DRIVE Hyperion is geared towards deployment and is powered by “the AGX Thor system-on-a-chip” an automotive-grade chip announced in 2022 that is planned to go into production this year.

Nvidia also announced that Toyota joined a growing list of partners (including Mercedes, Jaguar, and Volvo) using its AV platform. Despite the news Toyota stock ($TM) is down 5% this week.

With all these advancements, Huang says AI is entering a new era, the era of ‘physical AI’:

📊 What Does All This Mean for the Stock?

While I am no technical expert, reading through the coverage of the CES announcements across tech publications (Mashable, TechCrunch, etc.), the consensus is that these advancements are indeed transformational - but how will they impact Nvidia’s bottom line?

Well, as Fortune puts it, “Nvidia knows it can’t just ride today’s AI wave forever, it must help create the next wave.” 

As we’ve discussed before, there are a lot of fears swirling around about big tech overspending on AI and tech’s need to show a strong return on the billions invested in AI (and specifically Nvidia chips).

Ultimately, if the end applications of Nvidia’s chips are not delivering a clear ROI, it's logical that companies would at some point stop investing in them. But with Nvidia’s recent advancements, emphasized in Huang’s CES announcements, the ‘end-applications’ for the Nvidia chips are multiplying, which is very interesting and exciting for Nvidia investors.

Now, it’s worth noting that this doesn’t necessarily mean Nvidia is a buy - the stock has a forward price-earnings ratio of 31.75x, meaning a decent amount of future growth expectations are already priced into the stock - but analysts were overall very bullish after the announcements.

Bank of America analysts called Nvidia a “top pick” for its continued AI dominance with “growing reach across different enterprise and consumer sectors”, and of the 40 analysts covering Nvidia on Tip Ranks, over 90% have Buy Ratings.

Wedbush analysts projected the robotics and autonomous tech market could present another $1 trillion opportunity for Nvidia over the next few years.

Altogether, I think it’s hard to see this week as anything but a big win for AI, and if you were bullish before, you’d be justified to be even more bullish now.

OTHER STOCK MARKET NEWS
📉 Quantum Stocks Crash By Up to 50% After Nvidia CEO Says the Tech is Up to 30 Years Away

📉 If this week was a ‘big win’ for AI, it was a massive L for Quantum stocks, with some stocks falling over 50%.

The reason? One small comment from Nvidia CEO Jensen Huang “that useful quantum computers are probably at least 15-30 years away.” This sent quantum stocks into free-fall:

• Arqit Quantum ($ARQQ) fell 51%

• D-Wave Quantum ($QBTS) fell 37%

• Rigetti Computing ($RGTI) fell 53%

• IonQ ($QUBT) fell 26%

Specifically, Huang explained that quantum computers need to scale up their processing units (qubits) by a factor of 1 million to become impactful. Currently, Google has achieved a quantum computer with only 105 qubits - and with qubits requiring extremely cold temperatures to function and very prone to noise, the task to scale the qubits that significantly is not an easy one.

While Jensen Huang’s comments were clearly a surprise to many, it’s not as if this prediction hasn’t been made before.

About a month ago, a YouTuber I’ve mentioned before on the Buzz ‘Wall Street Millennial (WSM)’ put out a video titled “Quantum Hype Has Reached The Point Of Absurdity” with the following arguments:

• A lot of the hype around Quantum has been driven by Google’s statements that ‘Willow’ (its Quantum computer) could perform a computation in under 5 minutes that would take the fastest supercomputer ‘10 septillion years’.

• While this led to media hype of Quantum’s transformational potential in AI, cybersecurity, and scientific research, the task that the computer completed called “random circuit sampling” has no practical applications.

• Google went so far as to say that the quantum computation may prove we live in a multiverse, which WSM calls ‘absurd’ criticizing the “10 septillion years” benchmark as an arbitrary benchmark based on current supercomputer limitations.

👎 D-Wave Quantum CEO Says Huang is “Dead Wrong”

With Jensen Huang’s comment causing nearly $8B in lost market cap for quantum computing companies, many quickly jumped to the defense.

D-Wave Quantum CEO Alan Baratz said Huang was “dead-wrong” saying D-Wave already has commercial use Quantum computers - citing Mastercard as a prominent client leveraging quantum for real-world business operations.

After researching this a bit more, it seems the distinction is that D-Wave offers a ‘quantum annealer’, which while not the same as a ‘general-purpose’ quantum computer, can be used to solve a variety of optimization problems.

💊 Unlike with general-purpose quantum computers though, it hasn't been mathematically demonstrated that quantum annealers can consistently outperform traditional computers, but as Baratz said they are being used to solve real world problems such as drug discovery in the Pharma industry.

👇 Share your thoughts and see what other readers think in the poll below! (this is my first time trying this poll feature so hopefully it works 🤞)

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