Four channel experts reflect on the Nvidia plunge

The Nvidia tumble on Tuesday left many wondering about the future of the channel and AI

It was all over the news this week: Nvidia experienced the worst day in the history of the stock market in terms of loss in total market value, as the American chip maker saw an almost ten per cent share price decline on Tuesday September 3.

The company lost $279bn (£211.8bn) in value, which equals to what only 27 companies on the planet are worth.

The fall is party due to the dampened interest in AI, as investors have grown sceptical of Nvidia and other AI stocks' sky-high valuations.

The decline might also be linked to the US government reportedly investigating the firm over potential anti-trust issues.

But one needs to take a step back and handle this information carefully, as despite this sharp fall, Nvidia stays on top.

The company shares are worth nine times more than in 2022, when the launch of ChatGPT set off the current AI trend, highly increasing the demand for Nvidia's chips.

To make sense of this chaos and confusion, we asked four resellers their opinion on what this means not only for Nvidia, but also for the channel and the future of AI.

CRN: Are the fluctuations in Nvidia's value something you're watching as a bellwether or otherwise?

Dr Colin Williams, business CTO, Computacenter: "Nvidia has delivered its recent substantial growth on technical and market transformation merit (i.e. with their technologies, software and architectural plays at the heart of much of the current GenAI/LLM wave).

"Crazily whilst the first wave of investment seemed to be aligned to larger scale AI model builders, a new wave is bubbling within the broader population of enterprise organisations.

"I think the current market softening seems to be an overcorrection because a substantial growth market still exists."

Chris Bunch, CEO of D55: "They're certainly the poster child for the AI industry! Which they thoroughly deserve having evolved their business from being primarily known for graphics cards at home, then to crypto mining and then riding the AI wave (specifically large model training).

"My tip to anyone interested in the stock market is generally to view trends over longer periods of time, rather than week-by-week variations.

"Overall the S&P (the main US index) suffered for a mix of reasons, and Nvidia has probably been hit further due to perhaps a feeling that big vendors have peaked their chip purchasing volume, and a DoJ investigation into them (which is the peril of being a large company with massive market dominance)."

Richard Behan, CCDO and co-owner of CAE Technology Services: " Nvidia stock has seemed to become a bellwether for the global economy as a whole.

"However, I don't believe the money has left the market, it has likely been deployed elsewhere into other stocks like Meta and Apple."

Rob Quickenden, CTO at Cisilion: "This situation is reminiscent of previous tech booms, such as the dotcom bubble in the early 2000s and the rapid rise and fall of social media platforms such as MySpace.

"Today we have seen ten per cent written off Nvidia value after all.

"We need to remember though that their value is still DOUBLE what they were a year ago!"

CRN: Do you think we've reached peak AI and, if so, what does this mean for partners and their clients looking to derive long-term value from the tech?

Colin Williams: "No, I don't think so.

"The broad market adoption of actionable AI, business value delivering AI at scale within enterprise organisations is still in the early days.

"However, the AI ‘investor' euphoria may be softening, and also enterprise organisations are seeking greater evidence to understand the business value of proposed AI projects, or investment programmes (more governance, visibility, security, business impact, etc)."

Chris Bunch: "Nope!

"I see there being a long way to go with AI, and organisations and individuals trying to both get more from their data and drive efficiencies in how they work.

"I'm not even sure you'll see less hype, just perhaps a smidge more cynicism.

"Come 2030, there will be a lot of AI in our lives."

Richard Behan: " We're certainly witnessing a significant surge in AI development, but I feel it would be premature to say we've reached the peak.

"There is still a vast amount of ongoing advancements that suggests we're far from plateauing."

Rob Quickenden: "The concept of reaching the 'peak of AI' refers to the idea that the hype and investment in AI technologies have reached their maximum, and we may now see a period of stabilisation or even decline.

"As I see it, several factors contribute to this viewpoint but in short I think the answer is no - far from it!"

CRN: Which vendors and conversely, which partners, in your opinion, have strong relationships with Nvidia and how is the fluctuation in sentiment likely to affect them, if at all?

Colin Williams: "Most major vendors I am aware of in the same way they have a professional friendship or cooperation relationship with Microsoft also have similar Nvidia optimisation or 'better together' solution blueprints.

"Many vendors are playing a long game with Nvidia and AI as a whole, therefore I would be surprised if a stock market wobble shifted long-term their thinking of the AI market potential for Nvidia moving forwards."

Chris Bunch: " Nvidia's numbers showed they get around 40 per cent of their revenue from just four massive tech companies - showing both the centralisation in tech, and the massive investments big tech is making in AI.

"Amazon, Meta, Microsoft and Google have all spent a fortune on Nvidia chips - tens of billions.

"This is incredible for end users, but obviously needs to pay back in some way in the future, which they're all betting on.

"All of those companies appear to be building their own chips, and will doubtless push harder on that in the future to drive down their own procurement costs - and attack the 90 per cent+ market ownership Nvidia provably has today.

"Intel and AMD should also be slightly on the front foot now, but I wouldn't bet against Nvidia to make a fortune from the next wave of AI chips in the Inference side."

Richard Behan: "Big tech players such as Amazon, Meta, Microsoft, Micron and Arm are some of Nvidia's biggest customers and partners.

"Their shares have typically increased as a result of Nvidia's AI platform or stock redeployment. With optimism still in the market, I would expect little negative effect."

Rob Quickenden: "The strong relationships and collaborative projects between Nvidia and its vendors and partners are likely to continue driving long-term value and innovation in the AI space."

CRN: Where are we on the AI growth curve as of September 2024, in your opinion?

Colin Williams: "My view may differ from others, but I still consider these early days on this next gen AI growth curve (ignited by the recent GenAI/LLM value play).

"Whilst there are numerous stories of AI potential and specific areas of value (fraud analysis, data mining, chatbots, etc), AI / GenAI / LLM transformational projects seem to be nowhere near saturation point from an impact and value, 'wall to wall' within enterprise organisations.

"This suggests a substantial runway exists for the market to continue to grow moving forward (however its unlikely to be the hockey stick curve of the last two years)."

Chris Bunch: "I think we're coming down the back side of the hype cycle, to coin a Gartner term, but that means we'll start to get realistic - and generally that is when the 'real' use cases start to add value after a bit of good old-fashioned disillusionment for a while.

Richard Behan: "I expect the market and global spending will continue to grow over the next three to five years.

"With a potential doubling in size predicted, we still have a long way to go on the curve."

Ron Quickenden: "I think we are still at the early phase of rapid growth and widespread adoption of AI technologies.

"The focus is shifting towards practical applications, responsible AI, and continuous innovation.

"We will see failures (in the wrong applications, big errors and other things), but in the whole, the case for genAI is a huge shift in how people work and interface with technology and we are just at the beginning of this.

"The economic impact and technical advancements indicate that AI will continue to be a transformative force in various industries.

"While we may see fluctuations in market sentiment, I believe the long-term potential of AI will remain strong, but competition and vendors in this space will increase, there will be many acquisitions and more stock gambles.

"Ultimately though, I believe we will witness continued growth and innovation in the coming years."