The stock price reached a new high! Embracing OpenAI with the left hand, helping competing products with the right hand, Nvidia is playing a big game

Author: Eric Editor: Zuri

Source: Silicon Rabbit Race

Image credit: Generated by Unbounded AI tools

NVIDIA's share price has doubled to a new high..

After the Federal Reserve pressed the pause button for the first time since it started raising interest rates in March 2022, Nvidia's stock price rose to about $430 today, a record high, firmly becoming a member of the trillion-dollar market capitalization club.

You know, in the past year, Nvidia's stock price has risen by 160%.

The most popular person in the current technology circle is Huang Renxun, the founder of Nvidia.

Since the beginning of this year, ChatGPT has set off a generative AI boom in the world, and the sales of AI chips have also been rising. NVIDIA, which focuses on AI chips, has continued to rise in stock price and market value. Recently, Huang Renxun created two "firsts":

The first chip company in history with a market value exceeding one trillion US dollars; the first Chinese entrepreneur to create a trillion US dollars.

Not long ago, there were rumors that Huang Renxun would visit China, but nothing happened. The entrepreneur who has been wearing a black leather jacket for more than ten years has always kept the outside world elusive.

What is even more unpredictable is his strategic thinking.

OpenAI obviously occupies the C position of this generative AI boom with ChatGPT. The relationship between Huang Renxun and OpenAI is also very close, because OpenAI has a huge demand for AI chips, which indirectly boosts Nvidia's performance growth. Huang Renxun himself also praised ChatGPT as one of the greatest existences in the computing field.

However, at the same time as OpenAI frequently expressed goodwill, Huang Renxun turned around and invested in one of its competitors-AI start-up company Cohere. Not long ago, Cohere announced that it had raised $270 million in its C round of venture capital, with a valuation of $2.2 billion. Participating parties include Nvidia, Oracle and Salesforce, among others.

Cohere claims the funding will accelerate its own leadership and put it in direct competition with OpenAI. Huang Renxun also expressed confidence in Cohere. He said: "The Cohere team has made fundamental contributions to generative AI. Their services will help companies around the world use these capabilities to automate and accelerate."

While shaking hands with OpenAI, while helping its competitors, what medicine does Huang Renxun sell in his gourd?

**Who is Cohere? **

Speaking of Cohere, in fact, it has a deep relationship with Google.

In 2017, Gomez, CEO and co-founder of Cohere, worked as an AI researcher at Google. He also worked with other talents at Google to develop the natural language processing method Transformers and wrote the original paper.

Gomez said Transformers was originally worked on for Google Translate, but then it was used in search, Gmail, and YouTube, and eventually it was applied to almost all of Google's product areas, driving truly incredible changes.

The founder's working experience means that Cohere's technical foundation is still very strong, and the combat effectiveness of the entire team is not bad. Currently, Cohere employs more than 100 people. Earlier this year, former YouTube CFO Martin Kon joined Cohere as President and Chief Operating Officer.

Compared with OpenAI, Cohere has many similarities, but also has its own differentiation characteristics.

The same thing is that, like OpenAI, Cohere has helped people improve their work efficiency. The AI tools produced by Cohere can provide assistance for scenarios such as copywriting and search. Humans will be ten times more productive, according to Gome.

The biggest difference from OpenAI is that Cohere specifically emphasizes that it will not leak the data of corporate customers, which is also the most criticized pain point of OpenAI.

In order to iterate faster, a large language model needs to use a large amount of data for pre-training, but many countries and companies worry that data privacy will be leaked. Many countries in Europe have begun to pay attention to whether ChatGPT violates data privacy, etc., and Italy directly banned ChatGPT.

Clearly, Cohere sees a market opportunity in "data privacy" to differentiate itself from OpenAI's positioning. Its AI platform is specially designed for enterprises, providing data security deployment options in customers' existing cloud environments, greatly reducing the probability of data leakage, and customers will feel more at ease.

At present, Cohere's customers include global streaming media platforms, clothing companies, and recently it has cooperated with AI software company LivePerson to provide customized large-scale language models for enterprises.

Of course, compared with OpenAI, there is still a certain gap in the strength and influence of Cohere. In its 11th annual Disruptor 50 list, CNBC highlights private companies chasing the market's biggest opportunities and growing despite a difficult capital environment and economic slowdown. OpenAI ranks first in the list, and Cohere ranks 44th, the gap is not small.

So, why did Huang Renxun choose a start-up company that is not at the same level as OpenAI?

In fact, from the strategic actions of Microsoft and Google, the answer can be obtained by analogy.

Nvidia's Yangmou

The logic of Nvidia’s investment in Cohere is actually consistent with the logic of Microsoft’s investment in OpenAI and Google’s investment in Anthropic.

Microsoft caught Google by surprise with its investment in OpenAI. At present, Google may use a similar method to fight back against Microsoft, that is, use a start-up company to open the way instead of itself, and directly confront OpenAI. This company seems to be Anthropic at the moment.

Founded in 2021, Anthropic has developed an intelligent chatbot called Claude, which is comparable to ChatGPT in the eyes of industry insiders. Google has invested about $300 million in Anthropic for a roughly 10% stake, and Anthropic has chosen Google Cloud as its preferred cloud computing provider.

Interestingly, the founder of Cohere is from Google, while the founder of Anthropic invested by Google is from OpenAI.

The founder of Anthropic, Dario Amodei, was previously a manager of a technical research team within OpenAI. He worried that Microsoft's investment in OpenAI would put the company on a more commercial path, so he left to start Anthropic. Because of the different business philosophy, Anthropic has stood on the opposite side of OpenAI, and with the same "research-focused" values, it stands in the same array as Google.

Microsoft and Google, the two big tech giants, have already equipped a younger brother, ready to start a fiercer battle. How that turns out remains to be seen. What interests many people is that in this AI competition, Microsoft and Google are giants, and they can do better and faster by themselves, so why should they rely on smaller and weaker start-ups?

In fact, this kind of "big brother leading the younger brother" alliance can bring three benefits to the "big brother":

First of all, for technology giants, start-ups are sometimes more flexible in capturing the segmented needs of consumers and digging into new areas that the giants have not observed.

Secondly, start-up companies need resources such as funds and teams provided by giants in the early stage. For giants, choosing such a small company can get more equity, which is relatively controllable and the future returns will be considerable.

In addition, if the start-up company is located downstream of the giant, it will generate a huge demand for the products and services produced by the giant, and as its scale expands, it can drive the growth of the giant's performance.

Nvidia's investment in Cohere actually anchors triple gains:

The explosion of ChatGPT has brought surprises to Microsoft, and Cohere may also bring new business areas to Nvidia;

Secondly, as a start-up company, if Cohere develops as rapidly as OpenAI in the later stage, Nvidia's investment will also make a lot of money;

In addition, the development of Cohere also has a lot of demand for AI chips. If the development is accelerated in the later stage, it will also drive the growth of Nvidia's performance.

This is Huang Renxun's triple conspiracy of investing in Cohere.

Some people will say, why doesn't Nvidia invest in the more popular OpenAI? In fact, OpenAI is developing too fast, and its volume is not comparable to that of the past. Now Nvidia can only become a partner of OpenAI, but cannot have control like Microsoft.

Moreover, it is not only difficult to invest in OpenAI at this time, but also costly. It is better to invest in potential stocks like Cohere.

**Nvidia is the biggest winner in AI? **

In fact, even if you don't invest in start-ups like Cohere, Nvidia will make a lot of money in the AI era.

It is estimated that many people have already felt that after experiencing the Internet era, human beings are ushering in the AI era. According to a Bloomberg Intelligence report, in the next 10 years, the market size of generative AI will grow from US$40 billion in 2022 to US$1.3 trillion in 2032, with a compound annual growth rate expected to reach 42%.

Most AI companies have a very large demand for upstream AI chips. With its super high market share, Nvidia has become the absolute king of the AI chip market. The data shows that Nvidia's market share is as high as 91.4%, while the second-ranked rival AMD has a market share of only 8.5%. In the whole of last year, Nvidia PC GPU shipments reached 30.34 million units, nearly 4.5 times that of AMD.

What's even more frightening is that on the basis of its huge market share, Nvidia is still facing a market situation where supply exceeds demand. Nvidia CFO Kress said that the current market demand for AI computing power has exceeded the company's expectations for the next few quarters, and there are too many orders to fulfill. It is reported that an Nvidia A100 chip on the market has been fired up to 40,000 US dollars

Even Elon Musk, who called for the suspension of large-scale AI model training, still purchased 10,000 Nvidia GPUs, probably in response to the shortage of AI chips on the market.

Absolute strength means absolute development space. Nvidia expects revenue in the second quarter of this year to reach US$11 billion, a year-on-year increase of 64%, setting a record for the highest single-quarter sales in Nvidia's history, far exceeding Wall Street's previous expectations.

It can be said that in this wave of generative AI boom, Nvidia has become the biggest winner.

However, some people think that there is water in Nvidia's skyrocketing market value. Damodaran, known as the "Godfather of Valuation", said that other trillion-dollar companies use software to gain more profits in new products and services. And Nvidia is essentially just a hardware company, often facing natural limitations. He attributed the surge in Nvidia's market value to "good luck."

Whether it is because of good luck or not, Nvidia has already boarded the high-speed train of AI, and it is estimated that it will create new business records in the future.

Reference source:

• Nvidia invests in Google-linked generative AI startup Cohere (CNBC)
• Cohere announces $270M Series C to bring generative AI to the enterprise (GlobeNewsWire)
• OpenAI rival Cohere AI has flown under the radar. That may be about to change.（VentureBeat）