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NVIDIA and AMD: Digital Flywheels of Super-Exponential Innovation

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Last week I took investors on a whirlwind tour of deep learning and the companies making it happen. And you still had a chance to buy Advanced Micro Devices (AMD - Free Report) as it snuck above its 200-day moving average at $84.

That was after the huge volume surge off of $80 on the Google Cloud news I talked about here...

AI Dreams and Reality: Investing in Advanced Technology Artificial intelligence will create $50 trillion in economic value this decade as it transforms the world.

What has AMD shares up another 12% this week (so far)? How about regulatory approval from the UK for the planned acquisition of Xilinx (XLNX - Free Report) ? While China has yet to rule on the deal, Tuesday's news relieves some of the pressure that AMD investors were feeling as competitor NVIDIA (NVDA - Free Report) makes big plans in HPC (high-performance computing) with their planned acquisition of ARM Holdings.

In the video, I go over some of the "exascale" (a billion billion) battlegrounds as NVIDIA already creates new product and service offerings with ARM architectures.

And another catalyst for AMD this week was another delay from its other foe, Intel (INTC - Free Report) . Wells Fargo Wells Fargo analyst Aaron Rakers put out a note following an update from the company that implies a "slight delay" in the timing of their next-gen Sapphire Rapids Xeon-SP CPUs. He views the news as an "incremental positive" for AMD's competitive positioning.

This brings to mind the last time something like this happened and AMD roared above $60 in July...

Release the Ryzen! AMD Roars in the Nanometer Wars

The Xilinx acquisition will be a key driver of innovation and growth for AMD going forward. On April 7, both boards approved the deal and they described the marriage thus in the press release...

The acquisition will bring together two industry leaders with complementary product portfolios and customers, combining CPUs, GPUs, FPGAs, Adaptive SoCs and deep software expertise to enable leadership in computing platforms for cloud, edge and end devices. Together, the combined company will have the ability to capitalize on opportunities spanning some of the industry’s most important growth segments, including data centers, gaming, PCs, communications, automotive, industrial, aerospace and defense.

NVIDIA and the Digital Flywheels of Super-Exponential Innovation

In my video last week, I reminded investors to "always be buying" NVDA shares and to always check in to the NVIDIA Newsroom at least once a week to keep up with the wizards of AI and hyperscale computing.

In just a few days, the company has already dropped bombs of disruptive innovation and technology advance. For instance, on June 25, Jensen & Co. released a presentation that was shown at the industry conference Teratec in France.

Jensen's 18-minute keynote video is an amazing tour of what is possible when HPC is combined AI and simulation. Here's how they introduce the video...

Industrial high performance computing is at its tipping point. The combination of simulation, accelerated computing, and AI are bringing the performance and scale required to tackle real-world, industrial problems. Learn how this industrial HPC revolution will sweep through data centers, public and hybrid clouds and edge networks, and revolutionize every industry - from product manufacturing to aerospace and drug discovery.

What also stood out to me is Jensen's use of terminology like "digital flywheel" and "super-exponential" discoveries. About 5 years ago I remember a graphic that NVIDIA created to explain how the massively parallel architectures of GPU computing were reinventing Moore's Law to capture exponential growth again in processing power and knowledge.

I think he's outdone himself now with the chipsets and supercomputers his engineers can build, such that he probably has exceeded even what he thought was possible in terms of speed and power.

The Simulation Imperative

In the video that accompanies this article, I share some of Jensen's presentation slides that show how scientists in every field from molecular biology and genomics to climatology and astrophysics can simulate physical processes with HPC and make new discoveries or advance new R&D.

What I forgot to emphasize is how NVIDIA engineering teams in both hardware and software do their own massive simulations of new designs before they ever send anything to be built at the chip fabs.

And maintaining an open source approach to R&D, NVIDIA also just announced on Monday the formation of the AI-on-5G Innovation Lab with Google Cloud. Here's an excerpt from the Monday release...

NVIDIA and Google Cloud to Create Industry’s First AI-on-5G Lab to Speed Development of AI Everywhere

Joint Innovation Lab to Support Vendors in Conceiving, Testing, Optimizing, and Validating 5G and AI Applications Running On-Prem and Across Google Cloud
Monday, June 28, 2021
Mobile World Congress -- NVIDIA today announced that it is partnering with Google Cloud to establish the industry’s first AI-on-5G Innovation Lab, enabling network infrastructure players and AI software partners to develop, test and adopt solutions that will help accelerate the creation of smart cities, smart factories and other advanced 5G and AI applications.

The lab will provide enterprises with access to Google Cloud’s Anthos platform and NVIDIA accelerated computing hardware and software platforms that let them harness data and AI to drive business performance, improve operational efficiency and optimize safety and reliability. The companies will begin development in the second half of the year.

(end of NVIDIA PR excerpt)

This is huge news for "the edge," that place where devices and sensors can still do computational work without a high-speed internet connection or immediate access to cloud servers. Artificial Intelligence R&D goes exponential when it runs on 5G bandwidth and the IoT available to billions more devices, from cars and robots to smartphones and tablets.

This is why I've been an investor in companies like Qualcomm (QCOM - Free Report) who are also critical to the 5G rollout. I recently bought QCOM shares near $135 on a bet that the stock makes new highs above $166 this year.

I also just read a good report from BofA after QCOM's investor presentation a few weeks ago. They are seeing strong momentum in 5G and Apple channels and analyst Vivek Arya reiterated his $200 price target.

AMD Ready for Lift-Off

And I don't think it's too late to buy AMD. I've been recommending it under $80 since March because it trades at half the price/sales valuation of peer NVDA. Start a position under $95 and look for pullbacks to $90 to add. I believe we'll see new highs above $100 very soon.

What I didn't know when I taped the video Wednesday morning is that the same BofA analyst mentioned above raised his price target today on AMD from $110 to $120 for the same valuation and datacenter inroads I've been talking about all month!

Disclosure: I own NVDA, AMD, and QCOM for the Zacks TAZR Trader portfolio service.

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