Tech Newsround– Nvidia & Microsoft

Nvidia: early signals of pick-up.

• The current AI craze is already bearing fruit for lead supplier Nvidia as it appears to have turned the taps back on at TSMC as every man and his dog rushes to create a chatbot based on some large language model (LLM) or other.
• Monica Chen of Digitimes (see here) who is based just around the corner from TSMC’s HQ has picked up news that Nvidia has significantly increased orders for its A100, H100 and A800 series chipsets, all of which are used for training deep learning neural networks.
• In this climate, everyone is scrambling to build LLM-based chatbots of their own thinking that they are a must-have to stay competitive, but no one is really thinking about how much these things cost.
• This is excellent news for Nvidia because it has almost 100% market share in this space and comfortably makes 65% gross margins on the chips that it sells.
• Furthermore, the weakness in consumer graphics and crypto will have opened up the possibility for capacity to be switched to the A100, H100 and A800 without too much delay.
• Hence, Nvidia should be in reasonable shape to meet the unexpected jump in demand triggered by ChatGPT going viral.
• While the headlines are full of how LLMs put humanity on the brink of human-like artificial intelligence, reality is going to have no say in the proceedings.
• Hence, I think that the frenzy is going to continue for a while meaning that there is plenty of hay to be made for Nvidia.
• While I continue to be uncomfortable with Nvidia’s valuation, sentiment is once again behind the shares meaning that its current rally looks like it will continue for a while.

Microsoft: finally, a move on gaming.

• Microsoft’s move to create a mobile games app store does two things.
• First, it strengthens its position in its attempt to acquire Activision and second, it marks a return to a true-cross platform gaming strategy.
• The EU is forcing the digital ecosystems to allow rival app stores on their platforms from March 2024 which creates a new opportunity, especially on iOS.
• This is because rival app stores are already available on Google Android and so these new rules won’t make an enormous amount of difference to the Android ecosystem.
• This is a segment worth addressing as gaming has no dominant player (unlike all of the others) and it is of a reasonable size in terms of the amount of time people spend playing games.
• The problem with it is monetization as 97% of all smartphone gamers never pay anything for games but instead consume advertising.
• This has moved the centre of gravity in mobile gaming to Android which does not place limitations in terms of the data that games can collect in order to generate revenue.
• Microsoft lobbied for a long-time for cross-platform multiplayer gaming where it has had some success and a mobile app store takes this a step further.
• I have long argued that Xbox is a languishing asset inside Microsoft as it has been unwilling or unable to address the biggest gaming platform of all, smartphones.
• If it sees renewed traction for its gaming platform with the mobile app store, then this would help the appeal of the Xbox platform overall and greatly increase its value.
• Strengthening its position with regulators fearful of unfair competition would be the icing on the cake.