Nvidia stock rises on new generative AI products

Yahoo Finance tech editor Dan Howley, State Street Global Advisors Chief Investment Strategist Michael Arone, and eToro USA Investment Analyst Callie Cox join Yahoo Finance Live to discuss Nvidia's new supercomputer, the future of AI, and investing in AI.

Video Transcript

- Let's bring it back to the stock I mentioned. That is Nvidia. Guess what? It's up again 4% after its $140 billion rally in a single session last week. The chip maker is doubling down on generative AI. It now has unveiled its new supercomputer at the Computex forum in Taiwan. Nvidia CEO, Jensen Huang, saying the company has, quote, "closed the digital divide." Yahoo Finance's Dan Howley joins us now with the details.

And Dan, I know this is technical stuff, which you are expert in. Break it down for us. What exactly is this new product that Hwang talked about there?

DAN HOWLEY: Yeah. So essentially what they rolled out was the DGX GH200, and basically, it's a supercomputer platform. Now, it's made up of a number of graphics chips. 256 to be exact-- of their GH200 super chips. And so what that essentially does is they previously had the DGX A100. This is apparently has five times-- excuse me. 500 times the memory of a single one of their DGX A100 systems.

And so this is essentially built for AI. It's a supercomputer. This is not necessarily something that every company is going to have, but hyperscalers will be into this. And I just want to point out some of the other features that they announced. One is a new kind of gaming technology. That's right. They still are a gaming company. It's called Nvidia Ace, and this will bring generative AI to video games.

So currently, if you're playing a large game and you talk to a non-player character or a computerized character, someone has to go in and write the code for that, write the dialogue for that. This is going to allow companies to basically use generative AI to get those characters to speak and have tons of different dialogues. So it'll be really, really interesting to see.

They also announced that they're going ahead and have an agreement with WPP-- the advertising giant. They're going to be working with NVIDIA to make sure that their partners get their hands on a new kind of development platform that allows them to basically put together advertisements using generative AI.

So one of the examples was if there's a car ad, usually, they have to fly out someone with the car and go through that whole rigamarole, or they'll do a Hollywood-style workshop, where they'll go ahead and put together the graphics for it. But this, they'll be able to do it all from one single content platform. And so that's the pitch there. Is that any company can get their hands on this and go ahead and make a ad without having to go through all the expenses.

Now, obviously, there's the discussion of what does that mean for creatives, for all those jobs that then I guess would be eliminated as a result of this technology, but really, I think the conversation for Nvidia here is how much further they can push this.

And just to go over that supercomputer real quick-- the hyperscalers that are already working with Nvidia on this include Google Cloud, Facebook m Meta, and Microsoft. So they're among the companies that are going to be getting access to that supercomputer, and that will help them really drive their generative AI as well as general AI capabilities into the future.

- Yahoo Finance's own Dan Howley with the latest there on Nvidia. And for more on the future of artificial intelligence, let's bring back in Michael Arone, State Street Global Advisors' chief Investment Strategist, and Callie Cox, who is the eToro USA Investment Analyst. We'll get back to Callue later on, but Michael, let's start this conversation just with perhaps the rising tide at least of AI talk right now. Does that benefit everybody, or is it specific players that are going to be netting out as the most beneficiary gainers in this?

MICHAEL ARONE: So Brad, I think in the first stage of this, typically, with any new innovation, any new disruption, kind of rising tides lifts all boats. So anything with AI in it tends to do pretty well, and I think that's what we're seeing. I think there'll be a next phase or a next stage, where we start to weed out the winners and the losers, but I don't think that'll be for a little while.

So I think you'll continue to see anything with the AI, the generative AI label continue to do pretty well here, at least for this year. Probably in the first half of next year. And it won't be for a little bit, until you start to see the wheat separated from the chaff or the winners separated from the losers. Nvidia, though, clearly has a history of innovation on the gaming front.

I remember-- and I'll do this quickly. I had a neighbor come by, and he said to me, hey, I'm graduating high school. I have to pick a stock for my high school project. And this was 2018. What would you suggest? And sometimes strategists get lucky too. I said, you should pick Nvidia. I said, they're doing great stuff in gaming. I figured he'd like the video gaming stuff, and he thanks me all the time for-- I think he won.

And so here we are at 2023, and now, they're on the next stage of innovation. So I wouldn't doubt them. I just it's important in terms of-- kind of price is what you pay. Value is what you get. As an investor, I just get a little concern when I see these big jumps. I think we're getting a little ahead of ourselves in terms of the opportunity, but that will begin to take shape.

- I think he would say you're a good neighbor.


- I was going to say, I hope he put real money in there, not just for the purposes of the context.

MICHAEL ARONE: I did tell his dad. I said, I hope you put some of the college tuition in there cause that would have helped out.

- I want to pick up on that last point about price because you're looking at Nvidia potentially today hitting valuation. There's some reporting today that Cathie Wood said it's a little too rich for her blood, which is a fascinating call given what's in her portfolio. But how-- and I want to ask you about Nvidia specifically, but I'm just curious when you're talking about valuation, I mean, the potential for this stuff, the way you hear people talk about it is almost limitless. Does that mean you should pay anything for it?

MICHAEL ARONE: I don't think so. I think oftentimes we see that there's this big run in excitement and anticipation of future growth, and that future growth doesn't typically result in what's expected. And you see the disappointment. It's then typically as an investor when they disappoint and they don't live up to the hype, that's when you can really step in and buy some at a bargain or buy some of the winners from the losers and really make some money.

At least for right now, if you want to get in the AI game, I'd have a diversified few investments that might benefit from the trend because as I said to Brad, I think they'll all go up at least in a little bit here. And so I do think that AI-- anything with the AI label-- will continue to be positively viewed, but we'll definitely run ahead of what the business potential is in my opinion.

- Callie, we'd love to get your perspective on that too. When will, in terms of some of the investor attention that has rallied around or at least put a lot of mindshare into the AI trade right now-- when will that prove it or lose it in terms of the investor attention moment really kind of prevail or happen in front of our eyes?

CALLIE COX: Yeah. Well, first of all, I want Michael to be my neighbor. My neighbor is going to move out.

MICHAEL ARONE: There is a wait list.


CALLIE COX: I know. I know. Yeah. But when it comes to AI, I agree with everything Michael said here. I mean, right now, we're in the hype stage. We're trying to understand how much of this is real. And when I think about if AI can live up to that massive hype, I think about what it can do for the economy. How entrenched it could become into economic value, and for that, I look at productivity.

And I think there's something striking that a lot of investors are missing at the moment. I mean, we've seen a lot of advancements in tech in the 2010s, over the past decade, but we haven't seen the appropriate gains in productivity that come along with it. When I talk about productivity, I mean economic output per hours work. It actually is an economic data series that people measure.

So I think AI has a lot of potential, but for it to be like the second coming of the internet or something that could take hold, like the internet did, I think we need to see gains in productivity. Otherwise, this could be an exciting technological innovation that fizzles out a little bit earlier than one expected.

So I'm a little skeptical, but I'm still very excited about the promise of AI, and I think investors should consider that when they're thinking about where to invest and how much to allocate to this theme.

- I mean, to Callie's point, if it does live up to that promise, it might not just be good for these AI companies. It could be good for-- I mean, just buy the SPX. Buy the SPNY, right? And just benefit from that overall boost. I don't know. I mean, but that-- but it's hard to time all of that.

MICHAEL ARONE: Yeah, it's interesting. One of the other things that was kind of note was that companies in the S&P 500, to your point Julie, this earnings season, a record number of them mentioned AI. And so I think it was more than 100 companies, and that blew away the figures from all the way back to 2010.

Was a record number of mentions during earnings season. So certainly, other industries have kind of caught on to this trend or are excited about it. And one of the things that really stood out to me was that when they broke it down by sector-- of course technology is there. Of course, some of the other kind of communication services, but the other one was industrials.

So to your point, they're trying to find a way-- and to Callie's point-- to bring up that productivity, to use AI more efficiently to either improve their growth or better manage their efficiency in terms of their operations. Either way as good as from an investor standpoint. So I thought that was really interesting data that I just kind of came across this morning.

- Yeah, well, I guess time will tell whether it's like the other buzzwords that were mentioned a lot on conferencecals.com, blockchain, metaverse, or if it's going to be a more sustainable thing. We shall see. Callie, good to see you. Callie Cox is eToro USA Investment Analyst, and Michael Arone, State Street Global Advisors' Chief Investment Strategist.