Investors Shrug off Nvidia’s ‘A.I. Woodstock’

Are investors buying Nvidia’s latest A.I. vision?

Nvidia’s stock has soared more than fivefold since ChatGPT debuted in November 2022, a rally that has vaulted the chipmaker into the trillion-dollar market cap club on the back of investor fervor for artificial intelligence — and the high-end processors that power these models.

But shares in Nvidia are down in premarket trading on Tuesday after investors gave the first day of the company’s annual developer conference (known as “A.I. Woodstock”) a tough grade. That’s even after the semiconductor company introduced its latest chip, which is capable of running increasingly complex computing models.

Big money is expected to continue flowing into A.I. Nvidia and its peers (and their shareholders) have been the first to profit from this investment shift. But during a two-hour keynote speech on Monday, Jensen Huang, Nvidia’s C.E.O., painted a vision of A.I. turbocharging computing power, leading to a boom in robotics, autonomous transport, concierge-style retail and drugs discovery.

The new chip, Blackwell, will be “the engine to power this new industrial revolution,” he said. To underscore that, Nvidia recruited more than 100 customers — including from Amazon and the U.S. Army — to show off how they’re using the company’s hardware in their businesses.

“One hundred trillion dollars of the world’s industries are represented in this room today,” Huang said to cheers from the packed SAP Center in San Jose, Calif. (Huang said that the event was no rock concert, before making a joking reference to Taylor Swift, who has performed there.)

One big new customer is the Novo Nordisk Foundation, a top shareholder in the highly profitable Ozempic weight-loss drugmaker. The foundation and the Export and Investment Fund of Denmark announced that they would invest about $100 million in a new supercomputer powered by Nvidia chips and software.

Mads Krogsgaard Thomsen, the foundation’s C.E.O., told DealBook that the computer would be the most powerful of its kind in Europe, and would tackle “some of the world’s biggest challenges” in health care, climate science and the green transition.

That may include drug discovery: While it took researchers over a decade to come up with the class of drugs that includes Novo Nordisk’s Ozempic and Wegovy, advanced technology could take years off that process, Thomsen said. “The performance of generative A.I. is lifting the whole pharmaceutical science to a new level,” he said.

Some on Wall Street urge caution about the A.I. boom. While many analysts see Nvidia sales growing robustly over the next two years on the strength of demand for its chips, others wonder if its sky-high valuation is justified.

“Companies with high valuations often struggle to grow into their multiples regardless of realized growth rates,” analysts at Goldman Sachs wrote in an investor note ahead of Monday’s event.

HERE’S WHAT’S HAPPENING

Unilever plans to spin off its ice cream unit. The move to separate out the division, which includes the Ben & Jerry’s brand, is meant to streamline the consumer products giant’s operations and restart growth. It will also entail cutting 7,500 jobs. Shares in Unilever were up nearly 4 percent in London trading on the news.

Disney and Bob Iger win key support in their fight against Nelson Peltz. Glass Lewis, an influential proxy advisory firm, recommended that shareholders back the entertainment company’s slate of director nominees. And the filmmaker George Lucas, Disney’s biggest individual shareholder, also said that he was voting for Iger and the company’s other nominees.

Justice Department officials will reportedly brief senators on TikTok. The closed-door sessions, scheduled for Tuesday and Wednesday according to Bloomberg, come as some lawmakers try to force the video app to separate from its Chinese parent, ByteDance. Lisa Monaco, the deputy attorney general, backs the legislation, citing national security concerns.

The Supreme Court appears wary of limiting government contact with social media platforms. Justices questioned arguments by Louisiana and Missouri that federal efforts to persuade tech companies not to publish information (without the use of coercion) represent an infringement of the First Amendment. The states and five individuals sued after Biden administration officials urged platforms to take down content related to coronavirus vaccines and election fraud.

The Trump business empire is at risk

Donald Trump has been busy courting potential donors (perhaps including people who had been critics like the financier Nelson Peltz) to refill his campaign coffers, and Monday helped show why: His lawyers said in a court filing that he hadn’t been able to secure a $454 million bond for a civil fraud case in New York.

The former president still has options, including help from wealthy supporters or a favorable decision from an appeals court. But otherwise, he risks losing prized assets — or having to take longshot moves like seeking bankruptcy protection.

No one appears willing to provide an appellate bond of that size, Trump’s lawyers disclosed. They said that they had reached out to 30 companies, including Chubb and Warren Buffett’s Berkshire Hathaway, but none were willing to accept property as collateral.

That’s an issue because while Trump boasts of being a billionaire, a vast majority of his wealth is tied up in real estate holdings. He has already probably pledged over $100 million in liquid assets, like cash and easy-to-sell securities, to cover a bond in a defamation case against E. Jean Carroll.

The clock is ticking. Attorney General Letitia James of New York has set March 25 as the deadline for Trump to post a bond. She could give him more time, or an appeals court could intervene.

If neither happens, James could start seizing Trump’s bank accounts or, in a bigger blow to his identity, some of his properties. Among the most likely targets is Trump Tower, the building most closely associated with his public image. (That said, The Wall Street Journal notes that the process of seizing the real estate would not be immediate.)

There’s also a nuclear option, according to The Times: putting some of the Trump company’s entities into Chapter 11, which would automatically halt the judgment against them.

But Trump, who lived through a painful bankruptcy case in the 1990s, would most likely balk at that. And a bankruptcy filing could trigger defaults in his companies’ loans, setting off more litigation.

Japan Inc. gets a boost of confidence

The Bank of Japan ended eight years of negative interest rates this morning. Markets barely moved on the well-flagged decision. But it’s a symbolically important policy change nonetheless, and reflects changes to the Japanese economy.

The bank lifted its prime lending rate to between 0 and 0.1 percent, up from minus 0.1 percent and its first increase since 2007. It also reversed other global financial crisis-era policies that include: abandoning its yield curve control, which it has used to cap the yield on 10-year government bonds at no more than 1 percent; and it will no longer buy exchange-traded funds.

Japan has been on a roll as investors worried about China look elsewhere. The Nikkei 225 stock index hit a record high last month, surpassing a level it last reached in 1989. And Japanese workers just secured their biggest pay rise in more than 30 years, suggesting that the bank is confident it has turned a corner on deflation.

Big-name investors like Warren Buffett are bullish. The Berkshire Hathaway chief bet big on Japan during the coronavirus pandemic, investing billions in the country’s five big trading houses, and has doubled down on that strategy. Corporate governance reforms by the Tokyo Stock Exchange also appear to be attracting investors.

The latest changes aren’t likely to reverse some big outflows though. The country’s investors have spent about $3 trillion in global bond markets and yen trades as they looked for better returns abroad.

The country still faces huge structural challenges. “Japan’s big structural challenges — aging, population decline, sluggish consumption, high public debt and low economic growth rates — remain the same,” The Financial Times’s Robin Harding notes.

Gensler sets his sights on ‘A.I. washing’

Gary Gensler, the S.E.C. chairman, has been trying for years to stop companies from using buzz words to mislead investors, including cracking down on false claims about crypto and on greenwashing, or passing investments off as more environmentally focused than they are. Now, he has a new target: “A.I. washing.”

The S.E.C. fined two investment firms for exaggerating their A.I. abilities. The agency said on Monday that Delphia and Global Predictions had made “false and misleading statements” about using the tech in their forecasts. The firms settled with the S.E.C. and agreed to pay a total of $400,000 in penalties without admitting or denying the findings.

“A.I. is the most transformative technology of our time,” Gensler said, adding, that “when new technologies come along, we’ve also seen time and again false claims to investors by those purporting to use those new technologies.”

Companies are eager to harness A.I.’s buzz. Money is pouring into A.I. companies, with start-ups raising about $27 billion last year according to PitchBook, and A.I.-related stocks are soaring. More than 40 percent of S&P companies mentioned the tech in their most recent earnings reports, with growing interest in how organizations are deploying it.

Gensler has been warning against A.I. washing for months. “Don’t do it,” he said in December. “One shouldn’t greenwash, and one shouldn’t AI wash.” The S.E.C. issued an alert to investors about A.I. fraud in January.

The fines could be just the start of a wider clampdown. “Today’s enforcement actions should serve notice to the investment industry,” Gurbir Grewal, the S.E.C.’s enforcement chief, said on Monday. He also said that the agency was looking into other ways companies may be abusing A.I., including to manipulate markets.

THE SPEED READ

Deals

Revolving door

• Stephanie Cohen, one of the most senior executives at Goldman Sachs, is reportedly leaving the Wall Street bank to become chief strategy officer at Cloudflare, a cloud services provider. (WSJ)

• Chris Lehane, a member of the Clinton White House and a former policy chief at Airbnb, is reportedly near a deal to join OpenAI in a senior role. (The Information)

Best of the rest

• The insurer UnitedHealth Group said it had paid out more than $2 billion to help health care companies affected by a cyberattack at one of its subsidiaries. (CNBC)

• More than $2.7 billion worth of legal bets on basketball are expected during March Madness, according to estimates, as the sports betting industry continues to grow. (Axios)

• An award named after Ruth Bader Ginsburg has been called off after the former Supreme Court justice’s family objected to this year’s winners, who include Elon Musk and Rupert Murdoch. (WaPo)

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