Technology Investment Cycle: Insights Post-Nvidia Earnings

The tech ecosystem is transforming, revealing vast opportunities in AI and infrastructure despite current supply-demand imbalances.

### The Future of Technology Investment: Insights Post-Nvidia Earnings
* 💼  Demand for technology remains **exceptionally strong**, particularly among hyperscalers, enterprises, and nations, marking an **early stage in the investment cycle**.
* 🔗  The transition from manufacturing single chips to system-level compute requires a **cohesive ecosystem**, including advancements in **memory, networking, and software**.
* 📈  Despite some supply-demand imbalances, the outlook for the technology sector is optimistic, with a belief in the **transformative power of AI** and its potential to **redefine business models**.
* 🌍  While NVIDIA garners significant attention, it is crucial to recognize opportunities across the entire tech ecosystem, including **supply chain dynamics** and **emerging business models**.
* ⚡  Jensen Huang emphasizes the importance of energy efficiency in computing, highlighting that future technologies like Blackwell will deliver **more performance with lower power consumption**.
* 🌐  As an innovation investor, the focus remains on **fundamental growth stories** that persist regardless of economic cycles, with an emphasis on identifying **future winners** in a rapidly evolving landscape.
* 🔍  The current environment offers unique opportunities in **digital manufacturing, automation, and robotics**, which are expected to yield **significant returns** as infrastructure upgrades continue.
* ✨  Overall, while the focus on major players like NVIDIA is intense, the broader tech landscape holds **immense potential for active investors** willing to **explore beyond the spotlight**.

Do we know more about the world of technology, particularly the longevity of this investment cycle than we did prior to Nvidia's earnings parade just a few days ago? Well, thank you for having me here. So to start, one demand remains very strong and we're at the very early stages when we say demand is strong. We're seeing it across Hyperscalers. We're seeing it from enterprises and we're seeing it from nations as well. So at this stage and now with new product coming, you start to see these continue to see very robust demand for existing product. That's something actually we've never seen before in previous product cycles. So that's a strong signal. And then too, when we say early stages is yes, it's early stages, particularly on the supply side. We're going from manufacturing a single chip to a system-level compute. So a lot of things have to come together, whether it be memory

networking software, and that's even on the infrastructure side, the power, the cooling. So a lot of has to come together. And the ecosystem itself on the manufacturing side has to adapt. So there will be unevenness from time to time. So go back to there's a demand-supply imbalance, but we remain very constructive on the Outlook API. Lay AllianceBernstein, based on Bloomberg's data at least, is the 22nd largest shareholder of NVIDIA. Just generally your reaction to the earnings statement call and basically the hold watch party that was happening for that name around the world? We believe that the media remain one of the leading players in the AI ecosystem. What they're doing is transformative and it is early. So when you look at innovation and this early in the product cycle, you will see quarter to quarter perhaps a little bit unevenness. But as we believe, sometimes you have to look out to even make money near-term or

long term. So we continue to have a constructive view on the ecosystem as a whole, and we believe it is a leading position as well. I can only imagine how often at a cocktail party or dinner party you are taken to one side and grilled over really what the return on investment really is. Everyone's trying to understand when generative AI is really going to change all of our lives. What do you say to that? First, I would say one is about accelerated compute. It's a new form of compute that's far more efficient and powerful. And when you look at the existing players, the hyperscalers, they are using it to support their current business model. So if you look at infrastructure as a service in the cloud, you're seeing their spending because Azure is growing, Edelweiss is growing, GCP is growing. So that's one use case. And then two, in some of the existing industries, whether it be advertising or

life science or autonomous driving for that matter, you are starting to see general AI actually make a positive impact already. And we actually believe this is a great time for active investing because this is a time we can use it to identify the future winners and leaders, because it is an opportunity when such a transformative product cycle happens, you redefine who are the future winners and leaders. It's a one-time, once-in-a-lifetime opportunity for these players to actually get into each other's backyard. So we actually think you're going to see more and more business models emerging. We always say sometimes you take a step back without the build-out of a mobile ecosystem. Yeah, we wouldn't have had Uber, Spotify, Facebook for that matter. So we wouldn't have had the suburbs if we didn't build a highway. Right. It's still early and we believe the infrastructure build-out itself. They're already supporting some of the

existing business models, and we're watching very closely across industries to see new business models emerging. But what's so interesting, you've been doing this since 1999, 2000. Many people go back to Cisco in those years and ultimately how far it ran out and this focus on one particular name, but indeed the entire tech sector. Is that just too much focus on a singular name like NVIDIA? When do we start to broaden out? When do we not get the ultimate crash that we saw back in the 99-2000 run-up? Yes, I agree. You know, the market is hyper-focused on one name, but we are focused on the entire ecosystem. In fact, we think there are a lot of opportunities outside. You take a supply chain, for example. If we take a step back and then think high level, there's such supply-demand imbalance. The demand remains so robust, and we are

having supply chain issues. So one can say that when there is such an imbalance between demand supply, there's pricing power, then you profit pause. And then also with A.I., we're really redefining the future business models so you can actually find future winners and losers. So it is not just on one stock, it's rather the accelerator, the compute, the impact on the future of technology and frankly, the future of economic growth. Lay I tried to speak to Jensen Huang about the energy component of the supply chain. Let's listen to what he said. The most important thing that we do is increase the performance of and increase the performance and efficiency of our next generation. So Blackwell is many times more performant than Hopper at the same level of power used. And so that's energy efficiency, more performance worth the same amount of power or same performance at a lower power. Jensen looks at the energy component

through the lens of Blackwell's greater efficiency. How do you look at the energy component of accelerated computing? We certainly are very constructive on the energy efficiency of the future of compute, but we also are constructive on the physical and structural aspect of it. When we look at how the data centers will be powered and so much of greenfield power is actually needed, so we are quite constructive on the physical structure of it. In fact, if you take a step back and think about the digital infrastructure has actually leapfrogged the physical infrastructure of many developed nations, and we find many interesting plays there as well. LEY How do you balance all of this? The. Chaos around him. Video earnings, a single name. All of the central banks speak in all of the economic data in one week. What was that like for you and all the things crossing your desk? Well, that's the excitement about being an innovation investor. We focus on the secular story, the

stories that's going to drive stocks fundamentals regardless of what central bank will do. So we always go back to in 2008, iPhones still sold. So irrespective of economic cycle. When we focus on fundamentals, that's what active investment is about. We find stories that will grow irrespective of cyclical backdrop. So you've been looking active at the moment and you see the run-up in valuation of certain companies. We've all become completely euphoric around How do you broaden that out? You said look at the, you know, the supply side. Am I automatically thinking, okay, go global here, look at TSMC, look at some of the Japanese suppliers that feed into an NVIDIA. How are you looking at the broader wealth of opportunities that are outside just certain Big Mac seven names? We go back to the fundamentals. We're active investors, so we look at each company's with its own with respect to its own growth opportunity.

Obviously, at a high level, we are thematic investors. We look at how big the secular trend is. Then we look at the demand-supply imbalance and the longevity of it, and then we do look at it for at a global level and find who are the future winners and losers. Again, go back to it is a time of change, a time of inflection. And when time of inflection, sometimes we will find that market will underestimate some of the growth opportunities of different parts of the supply chain. And that's why we focus on one stock at a time and how, how, how strong the growth momentum is. And more importantly, are they going to get majority of the future profit for how the industry is being reshaped? That's what we focus on. You talk about this highway and everyone is really focused on the infrastructure play, but it was trying to work out, particularly the VC community, where the

value is in the applications. You talked about health care, about advertising already adopting generative AI, but where are some of those long-term opportunities? Where's being undervalued and underappreciated, and where can adopt generative A.I.? So, at a high level, I would say we are still early in the innovation investor. Sometimes, it does require a touch of imagination, if you will, because the future has yet to come. The future is the best part of it. But I would also point to we are already seeing this is this time is a little bit different. So, if you look back at the past 15 years, it's about the consumer electronics. You're seeing the killer app. We call them a killer app simply because we can touch and feel. But that said, this one is about the infrastructure upgrade, so it's less obvious, but that doesn't mean the opportunity is not as big.

When we look forward, we can see the digital manufacturing. When we think about the reshoring, how much we're going to need on the automation side, and it also the future of robotics. Those are some of the areas that we think we're going to see a lot of great opportunities ahead.

Early Innings for the AI Investment Cycle

Welcome to the Bloomberg Technology YouTube channel. Subscribe for original series and mini-docs on game-changing technologies, profiles on innovators, live conversations with experts, and breaking technology news & analysis from Bloomberg TV.

Bloomberg Technology

Strong Demand and Uneven Supply in Tech Investment Cycle

The demand for technology products, particularly from hyperscalers, enterprises, and nations, remains very strong and is at an early stage.

The transition from manufacturing a single chip to system-level compute is creating a supply-side imbalance, with various components needing to come together.

Despite the unevenness in the product cycle, there is a constructive outlook for the tech ecosystem, with accelerated compute being a key driver for existing players and supporting their business models.

General AI is starting to make a positive impact, creating a unique opportunity for active investing and identifying future winners and leaders.

The infrastructure build-out is supporting existing business models and new ones are emerging across industries.

While there is a hyper-focus on companies like NVIDIA, the emphasis is on the entire ecosystem, with opportunities also arising from supply chain imbalances.

Redefining Business Models and Energy Efficiency

Supply chain issues are creating an imbalance between demand and supply, leading to pricing power and profit pauses.

is reshaping future business models, impacting technology and economic growth.

Jensen Huang emphasizes the importance of energy efficiency in accelerated computing, with Blackwell's greater performance driving the need for greenfield power and innovative plays in digital infrastructure.

Active Investment Strategies Amid Economic Cycles

Active investors focus on company fundamentals to identify growth stories that thrive regardless of economic conditions.

They take a thematic approach, analyzing global opportunities and the demand-supply imbalance to find future winners and losers.

The strategy involves a deep dive into individual companies, assessing their growth momentum and potential for capturing future industry profits.

Generative AI is still in its early stages, with long-term opportunities lying in infrastructure upgrades rather than consumer electronics.

Key areas for growth include digital manufacturing, reshoring, automation, and robotics.

These sectors are expected to offer significant opportunities as the demand for automation and innovative solutions increases.