Nvidia

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Nvidia - a world-class producer of 'mission-critical' microchips

Nvidia as an American multinational, positioned at the very centre of the Artificial Intelligence (AI) revolution. It’s a world-class producer of 'mission-critical' microchips renowned for leading-edge processing power and, more recently, sought-after software, essential to companies eagerly embracing AI solutions.

High-conviction portfolio holding since 2021

Nvidia has been a significant holding in Martin Currie Global Portfolio Trust since March 2021. The investment rationale stemmed from our view that the market had underestimated the transformative potential of AI – which I call a ‘seismic shift’ – and was undervaluing Nvidia's mid to long-term growth prospects.
 

Dominant position created barriers to entry

This strategic focus has allowed Nvidia to build a position as a market leader in both the hardware and software behind AI advances, with a depth of expertise and scale that offers significant competitive advantages – and has created real barriers to entry.

Nvidia initially gained recognition for its lightning-fast Graphic Processing Units (GPUs) used for gaming. Its foresight also led to substantial investment in AI research and development and the production of advanced chips with the levels of accelerated processing power required to underpin new AI solutions - enabling the success of generative models like ChatGPT.
 

Its historical association is with gaming but Nvidia's growth trajectory has evolved, with AI-related revenue accounting for a substantial portion of its earnings – currently 80%. And it commands 90% market share in GPUs for data centres - the physical locations that store computing hardware for the likes of cloud storage.¹

World’s third largest company

As of the latest market data [March 2024] Nvidia commands a market capitalization nearing US$ 2 trillion, making it the third most valuable company in the S&P 500 index, behind only Microsoft and Apple. ²

Nvidia's strategic positioning aligns perfectly with the increasing demand for cloud infrastructure upgrades and AI investment to enhance competitiveness. The company's dominance in GPU market share, especially in data centres, further cements its standing as a leading player in the AI ecosystem.

And the market universe is still growing, with estimates of USD$300 million, more than tripling to USD$1 trillion a year later - and now Nvidia’s CEO is talking about USD$ 2 trillion as plausible! ³
 

Soaring demand from AI leaders boosting profits

In response to this soaring demand for its products, Nvidia has scaled-up production and also accelerated its upgrade cycle. Its returns have surpassed market expectations and led to a positive re-rating. However, even after delivering remarkable sales and profit growth – USD$ 22.1 billion sales in the last quarter of 2023 and YoY profit growth of 769% - the company still faces challenges in meeting the demand from major clients like Microsoft and Amazon.⁴

As investors seek exposure to AI opportunities, our focus remains on companies that can effectively monetise the AI boom with “mission critical” components. We believe that Nvidia is in a leadership position, poised to capitalise further on the AI super cycle, akin to the role ASML plays in the semiconductor industry.

Conclusion: a dominant market leader positioned profit from the future of AI-powered tech

In conclusion, Nvidia is a high-conviction investment in our quality growth portfolio, primed to reap the benefits of the ongoing AI revolution. We believe that with its unparalleled expertise and market dominance, Nvidia is well-positioned to shape the future of AI-powered technologies.