NVDA

3 Words from Jensen Huang That Should Erase Investors' Biggest Worry About Nvidia

Nvidia (NASDAQ: NVDA) is the world's biggest artificial intelligence (AI) chip company, holding 80% share of the market. The company's graphics processing units (GPUs) power the most crucial AI functions, such as training and inferencing, but Nvidia doesn't stop there. The tech giant sells a whole portfolio of products and services that help businesses develop AI programs -- and potentially go on to save money and win in their industries.

Investors have expressed one big worry about Nvidia, though. The company faces a considerable amount of competition that ranges from fellow chip companies like Intel to Nvidia's own customers such as Amazon. The idea of competition eating into Nvidia's market share is a big concern, and if that scenario plays out, the tech company's stock could come under some serious pressure.

But here's good news for Nvidia investors and potential investors. Competition may not be a problem for the chip designer. In fact, three words from Nvidia chief executive officer Jensen Huang should erase your worries -- and reassure you about this company's long-term growth potential.

Three people are shown working in a data center.

Image source: Getty Images.

Nvidia's fast but expensive GPUs

First, a quick note on why some investors think Nvidia could lose business. Nvidia's GPUs are the fastest on the market, but they're also the most expensive. In recent times, rivals have focused on ramping up their AI efforts in order to offer customers a high-performance chip -- even if not at the level of the Nvidia GPU -- at a lower cost.

Intel announced its Gaudi 3 AI accelerator just recently and even said it has the potential to outperform Nvidia's current chip, the H100. And Amazon Web Services (AWS) has developed its own lower-cost training and inference chips for customers that don't want or need higher-priced options. (Amazon also sells a full range of Nvidia chips.)

Now, let's consider what Nvidia CEO Huang has to say. It's as simple as this: "We're practically everywhere," he said during this week's fiscal 2025 first-quarter earnings call. He was referring to the fact that Nvidia's products and services are available on-premises as well as through every public cloud, from AWS to Oracle.

"So for developers that are looking for a platform to develop on, starting with Nvidia is always a great choice," Huang added.

Nvidia's chances of staying on top

Nvidia has a good chance of staying on top thanks to the fact that its offerings are easily accessible -- and its fantastic reputation makes it a no-brainer choice for many customers. This is a valid point and could keep customers choosing Nvidia -- and Huang offers two more elements that should keep Nvidia ahead over time.

The versatility of Nvidia's platform and the company's ability to build entire AI systems could reinforce its leadership position, Huang says. Customers can use Nvidia for a wide variety of tasks from data processing to training and inferencing and computer graphics. Versatility results in efficiency and energy savings, which eventually translates into lower costs. So customers may find it's worth spending more now on an Nvidia product to score a bigger gain over time. Finally, Nvidia builds "AI factories," orchestrating a whole system of chips and large language models so every element seamlessly fits -- and they all work perfectly together.

All of this means we aren't just looking at a single GPU and comparing its performance and cost to the AI chip of a rival. Nvidia offers customers top GPUs -- and aims to launch newer more powerful versions regularly -- as well as an entire ecosystem of AI products and services to suit every need of customers aiming to develop AI projects.

Does this mean rivals should pack up and go home? Not necessarily. The AI market is vast -- and growing. Analysts forecast theglobal marketwill reach more than $1 trillion by the end of the decade. So there's room for other players to carve out some share and succeed -- without disturbing Nvidia's leadership.

But Nvidia's strength does mean that, even after climbing in the triple digits over the past year, Nvidia stock still represents a solid long-term buy for investors. The company's leadership should continue well into the future, and that means explosive earnings growth and share-price performance may be far from over.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adria Cimino has positions in Amazon and Oracle. The Motley Fool has positions in and recommends Amazon, Nvidia, and Oracle. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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