There Are Three Things That Matter In This Market – AI, AI and AI

This is a spectacular chart for the world’s greatest stock. I suspect Nvidia has become overbought, and allied to weakness in the semiconductor sector, the shares have been marking time. I don’t expect this to last much longer. If Nvidia was a smaller company growing at this rate and with this story I think the price could easily double.

The Birth Of AI Factories

The business could not be more on fire.

Blackwell production is in full steam. In fact, as Colette mentioned earlier, we will deliver this quarter more Blackwells than we had previously estimated. And so, the supply chain team is doing an incredible job working with our supply partners to increase Blackwell, and we’re going to continue to work hard to increase Blackwell through next year. It is the case that demand exceeds our supply.

And that’s expected as we’re in the beginnings of this generative AI revolution as we all know. And we’re at the beginning of a new generation of foundation models that are able to do reasoning and able to do long thinking. And of course, one of the really exciting areas is physical AI, AI that now understands the structure of the physical world. And so, Blackwell demand is very strong.

Jensen Huang, CEO and co-founder, Nvidia, Q3 2024, 20 November 2024

It is so exciting what is happening.

Hopper demand will continue through next year, surely the first several quarters of the next year. And meanwhile, we will ship more Blackwells next quarter than this, and we’ll ship more Blackwells the quarter after that than our first quarter. And so, that kind of puts it in perspective. We are really at the beginnings of two fundamental shifts in computing that is really quite significant.

The first is moving from coding that runs on CPUs to machine learning that creates neural networks that runs on GPUs. And that fundamental shift from coding to machine learning is widespread at this point. There are no companies who are not going to do machine learning. And so, machine learning is also what enables generative AI.

And so, on the one hand, the first thing that’s happening is $1 trillion worth of computing systems and data centres around the world is now being modernized for machine learning. On the other hand, secondarily, I guess, is that on top of these systems are going to be — we’re going to be creating a new type of capability called AI. And when we say generative AI, we’re essentially saying that these data centres are really AI factories. They’re generating something.

Just like we generate electricity, we’re now going to be generating AI. And if the number of customers is large, just as the number of consumers of electricity is large, these generators are going to be running 24/7. And today, many AI services are running 24/7, just like an AI factory. And so, we’re going to see this new type of system come online, and I call it an AI factory because that’s really as close to what it is.

It’s unlike a data centre of the past. And so, these two fundamental trends are really just beginning. And so, we expect this to happen, this growth, this modernisation, and the creation of a new industry to go on for several years.

Jensen Huang, CEO and co-founder, Nvidia, Q3 2024, 20 November 2024

SOXX Struggles But Probably Not For Long

One clue to what may lead to the next bull run in Nvidia shares is the behaviour of SOXX, the semiconductor ETF, which has been struggling for the last two quarters.

Nvidia is the largest constituent of SOXX, but other constituents, such as Advanced Micro Devices and especially Intel, have been experiencing various degrees of weakness. It is a matter of time before we have a buy signal for this index, which will take the brakes off the Nvidia share price.

Marvell Is A Marvel

Accelerated infrastructure is the foundation of AI, and Marvell tailors its technology to meet diverse compute requirements. With the industry’s most advanced and comprehensive accelerated infrastructure portfolio of compute, connectivity and storage, Marvell is powering the AI era.

Marvell Technology, website

Business is good and getting better.

For the third quarter of fiscal 2025, Marvell delivered revenue of $1.516bn, $66m above the midpoint of guidance, growing 19pc sequentially with the outperformance driven by strong AI demand and execution. As a result, our non-GAAP earnings per share of $0.43 was also well above the midpoint of guidance, growing by 43pc sequentially. This earnings growth rate, which was more than double our top-line growth rate, highlights the substantial operating leverage in our business model.

Stronger-than-forecast ramp in custom silicon was a key contributor to this performance. We believe that continued success in custom silicon will help accelerate our timeline to achieve our long-term target operating margin model. On a year-over-year basis, third quarter revenue grew by 7pc, marking a return to year-over-year growth for Marvell. I’m very pleased with our results and even more excited about our outlook for the fourth quarter, where we project revenue growth to accelerate to 26pc year-over-year growth at the midpoint of guidance.

Matthew Murphy, CEO, Marvell Technology, Q3 2024, 3 December 2024

The company is superbly placed for continuing growth.

We have in place a full suite of solutions across data centre interconnect, switching, and compute, and the ability to uniquely stitch these together into a unified platform. Marvell’s data centre end market has grown to account for 73pc of our consolidated revenue in the third quarter, driven by AI, and we expect this percentage to increase again in the fourth quarter. Marvell has rapidly transformed into an AI-first data centre semiconductor company. And we are completely focused on taking full advantage of our strong position in the AI super cycle.

Matthew Murphy, CEO, Marvell Technology, Q3 2024, 3 December 2024

It is a great time to own shares in Marvell.

Given the strong revenue outlook for this fourth quarter and our expectations for robust growth in fiscal 2026, we believe we are well-positioned to deliver outstanding financial returns to our stockholders.

Matthew Murphy, CEO, Marvell Technology, Q3 2024, 3 December 2024

This may all sound too obvious but it is amazing how often just listening to the CEO can pay dividends in the stock market.

This is a terrific chart which could easily have been a QV Alert.

Profits Soar At Amazon

After years of strong revenue growth, Amazon is becoming a massively profitable business. TTM stands for trailing 12 months.

Despite its huge size, Amazon is a massively innovative company made for the new era of super-powered AI and machine learning. It may seem incredible but I think these shares have a long way to run.

ServiceNow’s Game-changing Partnership With Nvidia

ServiceNow is made for the AI era.

For years, we’ve been talking about the mess of the 20th century enterprise systems.

Organisations around the world needed a platform to help them clean up that mess, so they can modernise for the AI world, ServiceNow is that chosen strategic platforms. And we integrate with all those other systems, orchestrate the silos into modern workflows and create a consistent consumer-grade user experience. It’s important to understand the history here. When public cloud solutions came online as the last secular shift in the enterprise, they created sprawling governance challenges.

CIOs [chief information officers] at the direction of their CEOs were asked to get things under control, the cost, security and integration. And ServiceNow played that role. Now the C-suite [where top management are located] is looking to ServiceNow to prevent another mess with AI. We do see the risk that every vendor’s bots and agents will scatter like hornets fleeing the nest and they trust ServiceNow as the governance control tower, which is a privileged position for our platform.

Bill McDermott, CEO, ServiceNow, Q3 2024, 23 October 2024

The outlook for ServiceNow is outstanding.

Our partnership with NVIDIA has been a game changer for enterprises embracing AI. We’re taking that to the next level by co-creating a shared vision on agentic AI. Together, NVIDIA and ServiceNow are developing out-of-the-box use cases for AI agents on the Now platform using NVIDIA NIM Agent Blueprints.

Customers simply turn on these capabilities and start reinventing workflows across the enterprise for small single issue resolutions, all the way to entire incident response workflows. You heard, acknowledge that ServiceNow launched RaptorDB, our new ultrafast database built for AI-first enterprises, which processes transactions 12 times faster, analytics 27 times faster. Customers, including Amadeus, are already in the process of implementing RaptorDB, to supercharge processing speeds across their global systems. Our data ambition doesn’t end there.

We are expanding deeper with our new workflow data fabric, which will unify business and technology data, so it flows seamlessly across the enterprise. Companies have always trusted us to bring order to the chaos of 20th century enterprise architectures. Now we can do the same with their data by powering automation and AI with real-time secure access to data from any source. Workflow Data Fabric also includes zero copy partnerships with established leaders like Databricks and Snowflake so customers can turn data into instant AI-powered action, all on the ServiceNow platform.

Bill McDermott, CEO, ServiceNow, Q3 2024, 23 October 2024

Share Recommendations (6 December 2024)

Nvidia NVDA

Marvell Technology. MRVL

Amazon.com. AMZN

ServiceNow. NOW

Strategy – AI Is Going To Be HUGE!!!

Everything I read tells me that this AI revolution is still being underestimated. We have had decades of steady growth changing the modern world with technology; that whole process has gone into overdrive and the impact on shares is going to be seismic.