Getting Ready For Blast-Off – Nvidia Bubbles

Almost daily it seems there are announcements about planned data centre investments. The latest is Donald Trump’s $500bn Stargate initiative to build AI infrastructure across the United States. Nvidia has the best technology. If they cannot make a ton of money in this situation they should give up and go home.

There are tons of other companies also involved in making it happen. It is an incredible time to be a cutting-edge technology company anywhere but especially in the US where most of them are located.

Just look at what is happening in healthcare alone.

NVIDIA today announced new partnerships to transform the $10 trillion healthcare and life sciences industry by accelerating drug discovery, enhancing genomic research and pioneering advanced healthcare services with agentic and generative AI.

The convergence of AI, accelerated computing and biological data is turning healthcare into the largest technology industry. Healthcare leaders IQVIA, Illumina and Mayo Clinic, as well as Arc Institute, are using the latest NVIDIA technologies to develop solutions that will help advance human health.

These solutions include AI agents that can speed clinical trials by reducing administrative burden, AI models that learn from biology instruments to advance drug discovery and digital pathology, and physical AI robots for surgery, patient monitoring and operations. AI agents, AI instruments and AI robots will help address the $3 trillion of operations dedicated to supporting industry growth and create an AI factory opportunity in the hundreds of billions of dollars.

“AI offers an exceptional opportunity to advance healthcare and life sciences with tools that help providers detect diseases earlier and discover new treatments faster,” said Kimberly Powell, vice president of healthcare at NVIDIA. “The combination of NVIDIA’s AI and accelerated computing capabilities with the expertise of industry leaders is poised to usher in a new era of medical and biological innovation and improve patient outcomes worldwide.

Nvidia news, website, 13 January 2025

The implications of the AI boom spread far and wide.

One of the quirks of the stock market is that human beings tend not to recognise that something is happening until it comes up behind them and hits them over the head. We know AI is starting to change everything but we still won’t believe it until we see it.

Little booms are happening everywhere.

What Arista Networks is doing in networking adds up to a powerful ‘something new’ for the company.

Networking for AI is gaining a lot of traction as we move from trials in 2023 to more pilots in 2024, collecting to thousands of GPUs and we expect more production in 2025 and 2026. In all vernacular, Arista AI centres are made up of both the back-end clusters and front-end networks. AI traffic differs greatly from cloud workloads in terms of diversity, duration and size of flow.The fidelity of AI traffic flows with the slowest flow matters and one slow flow could slow down the entire job completion time is a crucial factor in networking. Our AI centres connect seamlessly from the back end to the front end of compute, storage, WAN and cluster cloud networks. Arista is emerging as a pioneer in scale-out Ethernet accelerated networking for large-scale training and AI workloads.

Regarding AI infrastructure, NVIDIA (NVDA) is the dominant player on the back end for GPU (Graphics Processing Units) based AI chips and networking (InfiniBand switches). Arista is dominant on the front end with Ethernet switches and is starting to make inroads on the back end with Ethernet switches to connect servers, NVIDIA GPUs, and other high-performance computing resources.

Currently, the major cloud providers such as Amazon’s (AMZN) AWS, Microsoft’s (MSFT) Azure, and Alphabet’s (GOOGL)(GOOG) GCP [Google Cloud Platform] nhave primarily focused on building out the AI back end where NVIDIA is dominant. The central thesis for investing in Arista Networks today is that, eventually, cloud providers will begin focusing on building out the front end of the AI network, and Arista should benefit disproportionately.

Seeking Alpha, 27 November 2024

Netflix is one of the world’s leading entertainment services with over 300m paid memberships in over 190 countries enjoying TV series, films and games across a wide variety of genres and languages. Members can play, pause and resume watching as much as they want, anytime, anywhere, and can change their plans at any time.

Netflix, website

Like others of these great US technology-based companies, Netflix is made for AI. It has the money, it has the reach and it has the know-how.

This is a company at the top of its game.

In 2024, we executed on our plan to reaccelerate growth.
○ For the year, revenue grew 16pc and operating margin expanded six points to 27pc. Operating income exceeded $10bn for the first time in our history.
○ In Q4, revenue increased 16pc year over year, helped by 19M paid net adds, while operating income rose 52pc year over year. We finished 2024 with 302M memberships.
● Our Q4 slate outperformed even our high expectations: Squid Game season 2 is on track to become one of our most watched original series seasons, Carry-On joined our all-time Top 10 films list, the Jake Paul vs. Mike Tyson fight became the most-streamed sporting event ever and on Christmas Day we delivered the two most-streamed NFL games in history.
● Our priorities for 2025 are to:
○ Improve our core business with more series and films our members love, an enhanced product experience and growth of our ads business;
○ Further develop newer initiatives such as live programming and games;
○ Sustain healthy growth – we now forecast 2025 revenue of $43.5-$44.5bn (+$0.5bn vs. prior forecast, despite the strengthening of the US dollar) and an operating margin of 29pc, up one point from our prior forecast.
● We maintain a leadership position in engagement, revenue and profit. We’re focused on improving all aspects of our service and, combined with the return in 2025 of our biggest shows (Squid Game, Wednesday and Stranger Things), we’re optimistic heading into the new year.

Nvidia, Shareholders Letter, Q4 2024, 21 January 2025

I listed the constituents of the Nasdaq 100 by market value. Nearly half the list (42 companies) are valued at over $100bn with eight companies over $1 trillion and five in multiple trillions. This world would have been unimaginable even a few years ago.

Data Centres On The Moon

Many investors and commentators learned how to value stocks in a world that no longer exists. Stocks are more like Bitcoin now, subject to wild swings in value and anticipating a future full of wonders none can anticipate. Business leaders are already talking seriously about data centres on the moon, men on Mars, and wars being fought in space.

The one thing that does not change is humanity’s propensity to divide up into warring tribes. Warfare has been transformed many times in the past. The early Egyptians had no answer in 677BC when the Assyrians arrived in their horse-drawn chariots. The Allies had no answer when a tank-led German Blitzreig smashed across the Low Countries early in the Second World War. The Chinese had no answer when Kublai Khan and a horde of mounted tribesmen from the Steppes swept into China in 1279 adding to an already vast Mongol empire.

If Alexander Karp of Palantir is to be believed software and AI are about to transform warfare again in the 21st century and only countries with huge resources and a massive industrial/ corporate base will be able to play this game. The Empire Strikes Back with a vengeance.

One of Karp’s contentions is that dedicated military equipment companies will never cut it when it comes to winning wars. They grow fat on government contracts, their products are only rarely tested on the corporate battlefield {where efficiency is key and bad products die} and they are unable to ramp up production rapidly if and when it becomes needed.

Civil corporations stand or fall by the quality of their products and are being tested on the (notional) battlefield all the time. In the Second World War companies like General Motors, with accumulated skills in mass manufacturing turned their skills to making battlefield vehicles in vast quantities stunning the Germans with their ability to rapidly make America a serious fighting force.

We may only need the capability (Tesla making tanks) in the event of an actual major war but the arms manufacturers of the future need to use all the latest production techniques to take the cost out of their products and give them the ability to dramatically increase production as needed.

We are in an era when being prepared for wars may make them less likely to happen and if they do we need the good guys to win. Karp and others naturally think the good guys are the Americans and maybe not the North Koreans [the leaders not regular people]- FREEDOM! as Mel Gibson roared so vividly in the film Braveheart.

Vertiv Looks A Fabulous Investment To Me

We had the agricultural revolution, then the industrial revolution and now we’re only about 40 years into the digital revolution. AI is just the next step in that digital revolution. AI is real, and it has just begun. It’s got a long way to go. Data centres are fundamental to all that computing. There is no other alternative even on the horizon. Distributed architecture enhances need for data centres, even quantum computing relies on digital-based data centres. We’ve enjoyed extremely strong orders in the first half of 2024 and we would agree that continued approximately 60pc order increases are unlikely as we tried to say last quarter. By the same token, we are seeing robust backlog building growth supporting orders continue.

Cloud and AI reinforce each other and drive the need for a lot of computing. Additionally, the AI ramp-up in countries outside the U.S. is just beginning. This bodes extremely well for Vertiv for a long time as a market leader in data center infrastructure. As the data centre infrastructure develops, liquid cooling increasingly comes to the fore and we continue to rapidly gain share. There are various parts to a liquid cooling system and like all our products, we’ve worked to position ourselves in the high IP [intellectual property] and know-how areas, specifically, CDUs and total systems.

Dave Cote, CEO, Vertiv Holdings, Q3 2024, 23 October 2024.

Powering The Data Centre Revolution

Oklo is a phenomenally exciting company with Sam Altman of OpenAI (CHatGBT) on the board.

“We are entering an era of unprecedented energy demand—rivalled perhaps only by initial conversion to electrification over a century ago. The world is now recognising nuclear’s role in powering that future. I’m confident we’ll look back on 2024 as the turning point in our mission to deliver clean, reliable, and affordable energy for all. Momentum is building every week—regulators are modernising, bipartisan support is growing, and some of the most influential companies are investing heavily in the space.
At Oklo, our focus on building small-scale, modern fission powerhouses—designed to be easily repeatable—along with our model of selling power directly to customers, allows us to accelerate timelines, reduce complexity, and scale to meet demand. With a site permit and secured fuel, we believe we’re poised to be a leader in deploying advanced nuclear by late 2027. As the world experiences an extraordinary transformation driven by AI, the future demands an equally bold solution for energy. We’re proud to lead the way.”

Okto, shareholders letter, Q3 2024, 14 November 2024

The data centre boom is driving what promises to be a massive shift towards nuclear energy. Okto is at the heart of this shift.

I could go on but hopefully, you get the idea. Spending in the trillions on data centres is going to require massive amounts of clean energy. Okta is positioning itself to play a key role in this process. A valuation of circa $5bn could be left way behind.

Share Recommendations (24 January 2025)

Nvidia. NVDA

Arista Networks. ANET

Netflix. NFLX

Vertiv Holdings VRT

Oklo. OKLO

Strategy – Be Sensible

Memo to myself – don’t go mad on the leverage and making money in this stock market is like taking candy from a baby. Forget about interest rates, the economy, inflation, valuations and all that nitty gritty stuff and think about the big picture. The world is turning into a giant computer that we can all tap into. It is going to be TOTALLY MIND-BLOWING!