NVIDIA

The CNBC Investing Club’s “Morning Meeting” discussed market pressures on Big Tech due to CoreWeave’s weak outlook, raising concerns about AI investment sustainability and debt levels. Soft labor market data also contributed to downward pressure. Linde shares rose after a UBS upgrade citing future earnings growth. Nvidia declined following SoftBank’s stake sale to fund OpenAI, reinforcing debt concerns around AI data centers despite the Club’s long-term view. The rapid-fire segment covered CoreWeave, Paramount Skydance, Amgen, Dutch Bros, and Coterra Energy.

SoftBank Group divested its entire $5.83 billion stake in Nvidia, selling 32.1 million shares in October. This move aims to bolster SoftBank’s AI investments, including its significant backing of OpenAI. While Nvidia shares saw a slight dip, analysts suggest the sale is driven by SoftBank’s need to rebalance its portfolio and fund ventures like the $500 billion Stargate AI data center project. SoftBank’s Vision Fund reported a $19 billion gain, contributing to doubled profits in the fiscal second quarter, reflecting its aggressive expansion in the AI sector.

AI stocks rebounded Monday, led by Nvidia, Broadcom, and Microsoft, as investors focused on long-term growth despite valuation concerns. Sentiment shifted towards future earnings potential. The market anticipates a potential end to the U.S. government shutdown, further boosting optimism. However, CoreWeave’s mixed earnings highlight profitability challenges in AI infrastructure. Putin ordered accelerating rare earth metal production in Russia, which has the world’s fifth-largest reserves.

The S&P 500 and Nasdaq rallied, recovering from recent losses, driven by optimism surrounding a potential resolution to the government shutdown. Nvidia led the gains, supported by CEO Huang’s expectation of increased wafer demand. This demand highlights the importance of wafer starts as an indicator of semiconductor market health, benefiting companies like Qnity Electronics. Sector performance was broad, with consumer discretionary and materials showing strength. Attention now turns to upcoming earnings reports and developments in Washington regarding the government shutdown.

Nvidia dominates the AI chip market, but Google is emerging as a silicon contender with its Tensor Processing Units (TPUs). Google’s Ironwood, its seventh-generation TPU, delivers a fourfold performance increase and is targeted at demanding AI workloads. AI startup Anthropic plans to deploy 1 million Ironwood TPUs. Google’s TPUs offer efficiency advantages and drive cloud growth. While Amazon and Microsoft are developing custom chips, Google leads in TPU deployment at scale, with potential for significant cloud market impact. Google is even exploring space-based solar power for TPUs.

Nvidia is caught between US and China’s AI chip restrictions, its market share in China plummeting from 95% to zero. Both countries are leveraging AI chips in a tech standoff. Despite lobbying efforts, Nvidia faces exclusion, as Beijing favors domestic chips and Washington restricts exports. This situation highlights the increasing difficulty for tech companies to remain neutral amidst geopolitical tensions, forcing them to choose sides and navigate complex regulations. Nvidia now anticipates zero revenue from China, signaling a potential permanent market separation.

Despite U.S. restrictions on advanced chip exports, China is making strides in AI development by leveraging domestically produced chips and strategic advantages. Huawei’s cluster approach links multiple chips to rival Nvidia’s performance. China’s access to affordable energy, driven by investments in renewables and nuclear, supports the high power consumption of these clusters. Government subsidies further incentivize the use of domestic hardware. The long-term challenge remains bridging the performance gap as Nvidia and TSMC innovate, given ongoing technological restrictions.

US job losses surged in October, particularly in the tech sector, sparking concerns about stability and the impact of automation. Meanwhile, Elon Musk secured shareholder approval for a massive compensation package contingent on Tesla’s growth, contrasting with broader tech layoffs. Tech stocks, including Nvidia, experienced declines, reflecting market volatility and investor anxieties. Gulf monarchies are investing heavily in AI, aiming to diversify their economies amid fluctuating oil prices, facing both opportunities and risks.

Jensen Huang’s remarks on China’s potential AI dominance have sparked debate. He initially cited lower energy costs and less stringent regulations in China as advantages, prompting concerns about the U.S. losing its AI leadership. Nvidia later clarified that the U.S. is currently ahead, emphasizing the need to maintain developer reliance on Nvidia chips. Restricted access to the Chinese market, coupled with China’s focus on domestic AI chips, has seemingly shifted Huang’s focus to factors hindering Western AI development, like regulation and energy costs.

Nvidia joins the India Deep Tech Alliance (IDTA) as a founding member, committing to train and mentor Indian startups, leveraging its expertise in AI. This move aligns with a $2 billion commitment from private equity and venture capital investors to fuel deep tech companies in India. Nvidia will provide technical expertise through its Deep Learning Institute, focusing on AI model development and responsible deployment. India, supported by government initiatives and a growing AI market, is poised to become a global deep tech hub, hosting the AI Impact Summit next year.