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LET'S TALK ABOUT NVIDIA BECAUSE JEN-HSUN HUANG AND COMPANY, THEY'RE GOING ON ALL-OUT OFFENSE TO DEFEND THEIR COMPANY'S CROWN AS THE KINGS OF AI. IT'S A $30 BILLION SPENDING BLITZ AIMED SQUARELY AT THE NEXT PHASE OF THE AI ARMS RACE. SOMETHING CALLED INFERENCE. WE'RE HERE AT THE NASDAQ. CHRISTINA PARTSINEVELOS IS ALSO HERE AND HAS THAT STORY. I KNOW YOU GOT SOME THINGS, BUT WHAT IS INFERENCE IN LAYMAN'S TERMS?
IT'S LITERALLY THAT. SO LET'S SAY YOU'RE A DOCTOR, YOU TRAIN, YOU GO TO MEDICAL SCHOOL TO BECOME A DOCTOR. THAT'S THE TRAINING PART. THE INFERENCE PART IS ME SAYING, OH NO, I GOT A BROKEN TOOTH OR A BROKEN ARM.
YOU GO FOR A DENTIST FOR THAT.
YEAH, I KNOW, BECAUSE I HAD LIPSTICK ON MY TEETH. SO YOU WERE JUST NICELY TELLING ME THAT. AND SO YOU'RE THE DOCTOR. YOU'RE PROVIDING THE INFERENCE OF THE ANSWER, WHICH IS THE SHORT VERSION OF IT.
SO WHAT'S UP WITH THIS? WHAT'S UP WITH THIS SPENDING BLITZ?
MASSIVE BET. THANK YOU. IT'S MAKING A MASSIVE BET TO DOMINATE THE BATTLEGROUND IN AI, POTENTIALLY SPENDING UP TO $23 BILLION TO DO IT IN LESS THAN FOUR MONTHS. THE CHIP MAKER HAS EXECUTED TWO MAJOR DEALS AND IS POTENTIALLY PURSUING A THIRD, ALL FOCUSED ON INFERENCE. SO THE TECHNOLOGY THAT RUNS AI MODELS AFTER THEY'RE TRAINED, HOPEFULLY THAT DOCTOR ANALOGY WORKS.
BUT FIRST, IN LATE DECEMBER, NVIDIA CLOSED ITS LARGEST DEAL EVER, AROUND $20 BILLION FOR GROQ WITH A Q, ITS INFERENCE CHIP TECHNOLOGY. THEY BROUGHT IN ITS FOUNDER, JONATHAN ROSS, WHO ALSO CREATED GOOGLE'S TPU CHIPS. THOSE ARE THEIR CUSTOM CHIPS THAT DID YOU KNOW VERY WELL IN THE MOST RECENT AI MODELS. GEMINI.
SECOND, IN SEPTEMBER, NVIDIA PAID OVER $900 MILLION FOR FABRICA'S NETWORKING TECHNOLOGY THAT REALLY HELPS CONNECTS AI CHIPS WHILE ALSO HIRING ITS CEO AND KEY STAFF.
THIRD, NVIDIA IS REPORTEDLY IN ADVANCED TALKS TO BUY ISRAELI AI STARTUP AI 21 LABS FOR ROUGHLY $2 TO $3 BILLION, ACCORDING TO LOCAL ISRAELI MEDIA. AI 21 LABS ONLY DOES ABOUT $50 MILLION IN REVENUE, BUT THE DEAL IS VALUED OR VALUES IT AT ROUGHLY AT $10 TO $15 MILLION PER EMPLOYEE FOR THEIR 200-PERSON TEAM, MANY WHO HAVE PHDS. IT'S A PURE TALENT PLAY. NVIDIA DECLINED TO COMMENT ON THAT DEAL.
NVIDIA OWNS ROUGHLY 90% OF THE AI TRAINING MARKET, BUT INFERENCE IS FRAGMENTING VERY QUICKLY. INFERENCE IS CHEAPER TO RUN, DOESN'T NEED THE SAME HORSEPOWER NOR THE SAME MEMORY. AND SO THAT OPENS THE DOOR FOR COMPETITORS. GOOGLE, AMAZON. SO MANY COMPANIES ARE TRYING TO CREATE CUSTOM CHIPS. THEY'RE POPPING UP EVERYWHERE. ALTHOUGH THAT AI 21 DEAL IS NOT DONE JUST YET, THE SPENDING STRATEGY IS CLEAR, AND THAT IS TO LOCK DOWN INFERENCE TALENT, SPECIALTY TALENT AND TECHNOLOGY BEFORE THE COMPETITORS CAN.
FAIR ENOUGH. AND WE DON'T KNOW IF THEY'RE OVERPAYING FOR THIS STUFF. THERE'S A LOT OF GREAT RESTAURANTS RIGHT AROUND US HERE IN NEW YORK. I COULD PAY $30 FOR A PLATE OF SPAGHETTI OR $200 FOR THE SAME PLATE OF SPAGHETTI, AND IT DOESN'T MEAN IT WILL BE ANY BETTER. I WONDER IF THEY'RE OVERPAYING. YOU DON'T HAVE TO ADDRESS THAT, BUT WE CAN ADDRESS THE STOCK PRICE. BRING THAT CHART BACK UP. HERE'S THE DIRTY LITTLE SECRET: NVIDIA STOCK HASN'T DONE SQUAT IN ABOUT SIX MONTHS.
IT WAS THE OCTOBER HIGH. SO THAT WAS.
SO WHAT ARE PEOPLE. BUT THE STOCK HAS BASICALLY BEEN FLAT. YEAH, IT POPPED UP A LITTLE BIT IN OCTOBER. WHY, WHY IS THAT STOCK CHART NOT MOVING? WHAT ARE PEOPLE SAYING ABOUT THAT?
SO IN REGARDS TO THE STOCK, JUST OVER THE LAST LITTLE WHILE, ONE, THERE WAS PROFIT-TAKING IN MANY OF THESE AI PLAYS, BUT TWO, IT'S JUST LIKE, WHAT'S THE NEXT BIG CATALYST FOR NVIDIA? AND SO THEY'RE TURNING TO OTHER PLAYS LIKE MEMORY. RIGHT. THAT HAS SEEN A GIGANTIC. I KNOW YOU JUST TALKED ABOUT THAT, A GIGANTIC SURGE. SO THE UPSIDE FOR MANY STOCKHOLDERS IS LIKE, LET ME MOVE INTO THE OTHER PICKS AND SHOVELS OF THE AI TRADE.
TO YOUR COMMENT ABOUT SPENDING TOO MUCH, NVIDIA HAS ROUGHLY, WAS IT $80 BILLION IN FREE CASH FLOW, WHICH IS ESTIMATED TO BE $96 BILLION BY THE END OF THE FISCAL YEAR, TO INCREASE 58% NEXT YEAR. SO THERE'S A LOT OF CASH ON HAND. AND THEY NEED TO DO SOMETHING. THEY CAN ONLY. THEY ROUGHLY SPENT ABOUT $52 BILLION IN BUYING BACK SHARES TO HELP SHAREHOLDERS. WHAT ELSE ARE THEY GOING TO DO?
WELL, THEY'RE BUYING COMPANIES. YOU JUST SAID IT. THEY'RE BUYING. THEY'RE SPENDING BILLIONS AND BILLIONS AND BILLIONS OF DOLLARS TO BUY COMPANIES.
THEY ARE LARGE COMPANIES. SO THEY CAN'T JUST BUY IT. SO THEY'RE DOING THESE LIKE.
FAKE DEALS LIKE THIS GROQ THING. THEY DIDN'T BUY GROQ, BUT THEY KIND OF BOUGHT GROQ BECAUSE THEY'RE BRINGING THE CEO OVER. BUT GROQ, I GUESS, WILL STILL EXIST. WE CALL IT A DEAL. WE CALL IT A MERGER. WHAT DO WE CALL IT?
WE CALL IT AN ALLIANCE OR A PARTNERSHIP, WHICH SEEMS TO BE THE NORM, RIGHT? IF YOU TALK ABOUT.