Long Nvidia, but don’t buy until the market correction.
Nvidia is in the semiconductor business and focus on GPUs (Graphic Processing Units). Every computer requires a CPU (central processing unit) and a GPU to function. A CPU is like the brain and the GPU are the eyes.
GPUs are mainly used for 3 things: To display things on a computer (gaming, programming, 3d software, specialized software, VR), bitcoin mining, and artificial intelligence. GPU’s used for gaming have been stagnating while bitcoin have gone bust. However, the artificial intelligence field have been able to find a use for GPUs in running their AI simulations. Previously, CPUs were used to simulate AI learning, but using GPUs who has higher processing power can exponentially increase the pace of the simulation. For example, Tesla’s self-driving cars are made in partnership with nvidia and uses their GPUs.
Both Nvidia and AMD have been using AI to optimize their new generation GPU’s past the point of human engineering. This new generation of GPUs, the Nvidia 11 RTX Series and the AMD Radeon series will utilize AI as a core factor. At this time, the new generation GPUs AI are not fully developed and optimized. The RTX Series are evenly matched in processing power by the previous non-AI dependent GTX 1080 series, which are also much cheaper $700s vs. $2000+. However, once these new AI GPUs are optimized, they will allow current and future AI dependent software to operate at a yet unseen level. These AI GPU’s may also make Virtual Reality a more viable option to become mainstream.
Nvidia is the biggest GPU manufacturer, above its direct competitor AMD. AMD and NVDA are the 2 biggest players. NVDA has better operating and profit margins than AMD and is about 4 times as big as AMD. But this does not mean it has a better product.
Recently AMD GPUs have been just as good in quality as NVDA’s flagship GTX 1080 GPUs, making them almost direct substitutes to each other in terms of performance and usage.
Why buy NVDA instead of AMD? I have held both AMD and NVDA before. I have sold both my positions in April. This was because I was pessimistic about the US-Chinese trade talks finishing anytime soon, epically involving sensitive topics like semiconductors. I believe that the Chinese side have sensed that Trump is under a lot of pressure and have stalled their negotiations to put more pressure on President Trump. Also, I believe the demand for GPUs in China is a less than what NVDA’s mgmt predicts because most normally families to not own high-end computer. I suggest NVDA instead of AMD after the correction because I believe NVDA will fall harder.
