Published in Svenska Dagbladet, 2024-11-21. Translated from Swedish.
Nvidia doubled its profit and the market responded with an “okay.” The expectations placed on the world’s most valuable company have become a problem — for the entire stock market.
There are two types of companies on the stock market. The first requires a trained equity analyst to understand the business — someone meticulous and detail-oriented who reads every quarterly report looking for the smallest signal about where the stock is headed. The second type is companies like Nvidia. This week it was reported that Elon Musk’s AI company xAI is in the process of raising 66 billion kronor from investors, with the purpose of buying 100,000 new chips from Nvidia. You do not need to be a painstaking detective to pick up the signal in that news.
Despite this, markets were jittery ahead of Nvidia’s latest results. Nvidia — now the world’s most valuable listed company — has somewhat involuntarily become a barometer for something much larger than itself. The prevailing AI boom has benefited both tech companies and ordinary listed companies through optimism about increased revenues and future efficiencies. In recent days Meta launched a new division dedicated solely to selling AI solutions to businesses. At the foundation of all these AI ventures sit Nvidia’s products. When AI gains ground in the world, so does Nvidia right now.
When the chipmaker’s quarterly figures were presented Thursday evening Swedish time, this was more than evident. Revenue grew 94 percent and profit more than doubled. Which other company of this size can report that kind of growth? Or has ever done so? But Nvidia is not like others. When the company’s guidance for Q4 indicated growth of 70 percent, that figure had to be measured against the preceding year’s 265 percent growth rate. The expectations are enormous. The stock thus dipped slightly in after-hours trading — despite the almost extraordinary gains.
Nvidia appears to be priced for a perfect delivery in a perfect market. That is precisely what it has experienced over the past two years. But can it continue? One concern is whether AI will gain ground in the way many seem to hope. The tech giants’ investments in infrastructure have been gigantic so far, but there is anxiety that they may be costing more than they are worth. At the scale Nvidia now operates, it would take only a slight reduction in that long-term commitment — investments pushed a little further into the future — to hit Nvidia directly.
As the largest company on the market, it therefore attracts a disproportionate number of eyes. The whole market watches it to see which way the wind is blowing. The situation is unusual. Under normal circumstances most people would probably have ignored a chipmaker like Nvidia. It listed in 1999 and a safe guess is that the name was unknown to most readers until relatively recently. Now, suddenly, it is bigger than Apple, Microsoft and Google. Looking at the top 100 companies by market cap, Nvidia is as large as the bottom 25 on the list combined — a group that includes names like Goldman Sachs, Inditex and BlackRock. That is the scale we are talking about.
That size means the outside world now knows more about chip deliveries and production issues than it ever wanted to. If Nvidia’s new chip, Blackwell, were delayed or failed to perform as intended, it would be a problem for far more than just Nvidia. The company now appears in all major global index funds, in US equity funds, in technology funds. If you have money in the markets or a pension savings account, you are probably exposed to Nvidia too — likely more than you realise. The company that spent so long making graphics cards for gaming PCs has become a barometer for the stock market itself. That was never its intention. For now the tailwind for Nvidia and the AI revolution it leads is still strong. But should that weaken, it could quickly become a problem for far more people than just them.
