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Quick Read
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Custom silicon from Meta and Google is pressuring Nvidia’s GPU dominance, with hyperscalers potentially selling AI compute to third parties.
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Zuckerberg’s wartime AI approach and MTIA’s six-month innovation cycle leave META deeply undervalued at just 21 times trailing earnings.
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Semiconductor sector volatility and Nvidia’s compressing multiple make META a lower-risk alternative for investors seeking AI chip exposure.
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Nvidia (NASDAQ:NVDA) has been a huge winner of the AI revolution, but the big question is whether the competition is finally getting a chance to catch up. It seems like every big tech firm with enough money to spend wants to build its own custom silicon, and it makes a lot of sense, especially since how much money is flowing into Nvidia’s pockets for its GPUs. With a likely inference boom on the horizon, perhaps the custom silicon is more of a pressure release than a way to move past Nvidia.
At the end of the day, hyperscalers are making real, massive strides in efficiency with their latest silicon. From Google (whose parent firm is Alphabet (NASDAQ:GOOGL)) TPUs that Meta Platforms‘ (NASDAQ:META) MTIA chips, it looks like AI innovators are about ready to move on.
But, given the magnitude of AI demand and how quickly the appetite for tokens could rise, it feels like there’s more than enough demand to go around, even as new suppliers join the chat. Despite the new options, though, firms, including the hyperscalers making custom silicon themselves, are still using Nvidia GPUs.
But what happens when the hyperscalers bridge the gap and start gravitating more towards their own silicon while potentially selling it to third parties? That’s the big question that might keep Nvidia shareholders up at night. CapEx is blasting off now, but who knows? A pause or pullback in spend could be in the future if a digestion phase is needed. Time will tell.
The semis recent volatility might introduce a new risk
As Nvidia’s multiple compresses a bit as shares drag their feet relative to its rivals in the semi scene, I do think that the case for taking a raincheck is getting stronger. Not only is Nvidia stock not as explosive as some of the other semi stocks out there, but the shares also stand to sink if the semiconductor industry as a whole collectively rolls over. Perhaps there’s a reason why bear ETFs against the semiconductors have been so popular in the past couple of weeks.
