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Opinion: Say Goodbye to Nvidia's Biggest Competitive Edge in 2025

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Roughly 30 years ago, the internet began going mainstream and completely changed the way businesses operate. Although it took some time before companies fully understood the potential of business-to-business e-commerce and the power of virtual storefronts, the internet was nothing short of a game-changer for corporate America.

Since the mid-1990s, Wall Street and investors have been waiting for the next game-changing technology, innovation, or trend to provide the next leap forward for businesses. Artificial intelligence (AI) looks as if it's answered the call.

The outline of a human face emerging from a sea of pixels.
Image source: Getty Images.

The lure of AI-driven software and systems is that they can become more proficient at their assigned tasks over time, and learn new skills without human intervention. In theory, this gives the technology utility in almost every sector and industry around the globe. It also likely explains why the analysts at PwC believe AI will add $15.7 trillion to the global economy by the turn of the decade.

While no public company has benefited more directly from the AI revolution than Nvidia (NASDAQ: NVDA), the catalyst most responsible for its gains is liable to disappear in 2025.

The rise of AI has added more than $3 trillion to Nvidia's valuation

When 2022 came to a close, Nvidia was a $360 billion tech stock that was on the fringe of being a leading business. Today, it's a $3.44 trillion company that's arguably viewed as the most pivotal of all tech stocks.

Nvidia's fortunes shifted as a result of its ultra-popular AI graphics processing units (GPUs). These are effectively the brains of enterprise data centers that allow for split-second decision-making. Orders for Nvidia's H100 GPU (commonly known as the "Hopper") are backlogged, while CEO Jensen Huang has labeled demand for the successor Blackwell GPU architecture as "insane."

The laws of supply and demand clearly state that if the demand for a good or service outweighs supply, prices will rise until demand tapers. Nvidia's Hopper chip has commanded a price of between $30,000 and $40,000, which represents anywhere from a 100% to 300% premium over competing AI-GPUs. Being able to sell its GPUs at a premium has lifted the company's adjusted gross margin to north of 75%, as of the quarter ended July 28.

Don't overlook the role Nvidia's CUDA software platform has played, either. CUDA is the toolkit developers use to build large language models and get as much computing capability as possible out of their Nvidia GPUs. CUDA is keeping Nvidia's customers contained within its ecosystem of products and services.