The World’s Largest Chipmaker Hates Crypto, Loves AI

The world’s largest US chipmaker (by market cap) has a love-hate relationship with crypto.

• Nvidia (accidentally) benefited from the growth of crypto — as their chips were used to power the crypto mining industry.
• That helped create a chip shortage at a crucial time (2020-21) when other industries were also fighting for supply.

Now, Nvidia has some harsh words for the industry: Crypto does not “bring anything useful for society.” In 2021, Nvidia even throttled its chips to make crypto mining less effective.

Here’s what Nvidia is a fan of: Artificial intelligence.

The chipmaker is riding the generative AI trend — alongside the billions being committed by large tech companies to build out AI capabilities.

Nvidia’s AI chips are flying off the shelves.

• The supercomputer that the first version of ChatGPT trained on used over 10K Nvidia graphics chips.
• Tens of thousands of AI chips have been sold to Microsoft (OpenAI), another 20K to Amazon and 16K to Oracle.

That drove $NVDA up nearly 85% this year — sending its valuation “to the stratosphere,” per Morgan Stanley analyst Joseph Moore (WSJ).

Why investors need to be cautious

With a 59x price-to-earnings multiple, $NVDA is also the most expensive it’s been since the stock crashed in 2021 (>70x p/e ratio then). Per WSJ’s Dan Gallagher, each of the three times this ratio passed 50x, $NVDA came crashing down.