Good morning.
For a long time, the only people who knew the name Nvidia were tech nerds and gamers. For about two decades the company was trundling along, carving a niche with its specialised computer chips, GPUs, which enhanced image display for computers, and making a tidy profit.
But in the 2000s, experts realised Nvidia’s chips could do more than process graphics for video games – the tech could also be used to process the intricate equations driving AI systems. Nvidia’s decision to take a gamble on AI (and fortuitous timing), led it to eventually becoming the most valuable company in the world for a short time, overtaking Microsoft.
Since the launch of ChatGPT, the company’s stock has gone gangbusters, soaring by 239% in 2023. Its CEO, Jensen Huang (pictured above) has become something of a celebrity unto himself, and has been dubbed the “Taylor Swift of tech”. GPUs are now the de facto way that generative AI is powered.
But what goes up, inevitably, must come down. Geopolitical tensions, legal problems and concerns about an “AI bubble” have left the $3tn company facing an uncertain future, with $279bn (£212bn) wiped off its value in just one day last week. To unpick this story, I spoke with tech writer Chris Stokel-Walker. That’s right after the headlines.
Five big stories
Covid | A landmark study has uncovered corruption “red flags” in government Covid contracts worth more than £15bn – representing nearly one in every three pounds awarded by the Conservative administration during the pandemic.
Politics | As many as 50 Labour MPs could refuse to back the government’s controversial plan to cut the winter fuel allowance, despite Keir Starmer urging back benchers to get behind a measure he has conceded is “unpopular”.
Healthcare | Almost half of doctors internationally have been sexually harassed by patients, new research has found, prompting calls for medics to be given panic alarms to help repel such behaviour.
US elections | Donald Trump and Kamala Harris are in effect tied heading into the final weeks of the election campaign, according to a national poll conducted by the New York Times and Siena College, raising the stakes of Tuesday’s presidential debate.
Transport | Local transport authorities across England will be able to run and control bus services under a Labour overhaul designed to “save vital routes”, parliament will hear on Monday. The transport secretary, Louise Haigh, said the “bus revolution” would empower local communities as the government prepares to formally announce measures to make services more reliable.
In depth: ‘You cannot get the AI boom to work without Nvidia’
To emphasise the centrality of Nvidia’s products to generative AI, Chris equates its chips to oil. “You cannot get the AI boom to work without Nvidia’s products”, he says. Every company wants in on their tech, and it’s theirs if they cough up anywhere between $30,000 to $40,000 per AI chip. And companies are more than happy to fork out those sums – Nvidia announced record revenues of $30bn in just one quarter.
“If you track Nvidia from its initial public offering in 1999 to when it became the world’s most valuable company, it experienced a 591,000% increase in its share price,” Chris says. So, if the demand is there, why has Nvidia’s value dropped so dramatically?
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Unsustainable growth
For two years, Nvidia’s growth has been unprecedented, and investors wanted the company to maintain its momentum. But the simplest explanation for Nvidia’s plateau is that its rise has been unsustainable and time-limited.
“People thought that Nvidia was going to continue growing at that pace,” Chris says. The company is now in a strange situation where, even though their growth rate is still high – their revenue was up a record-breaking 15% from last quarter – it still falls short of market expectations, with shares taking a 7% hit.
“Practically any other CEO in the world would be overjoyed with the growth that Nvidia is seeing, but because it’s not like the obscene surges that were seen in prior years people are finding it a little bit underwhelming,” he adds.
The jitters around Nvidia’s slowdown is mirroring a wider concern about sky-high valuations in the AI sector. For the last year and a half, Wall Street has been throwing bucket-loads of money into the sector, but now it seems that investors are slightly more reserved, as they become more clear-eyed about the extent to which generative AI is going to become a transformative, world-changing technology. “I think most people still think that there will be an impact, but they maybe don’t think that everything is going to change quite as quickly as many thought,” Chris says.
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Supply chains
While Nvidia owns the technology, they do not mine or create the raw materials themselves, leaving them vulnerable to supply chain disruptions. Their primary supplier is the Taiwan Semiconductor Manufacturing Corporation, and there is apprehension about possible supply chain disruption given the increasing hostility between Taiwan and China.
“There is unease [about what would happen if] China decided to do something to Taiwan, then suddenly, what is already a very tight supply of chips which are being sold as fast as they’re being produced, could become even tighter,” Chris says. It has the potential, he says, to derail the whole supply chain.
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Legal woes
A report from analytics platform CB Insights estimates that Nvidia has 95% of the GPU market for machine learning, effectively creating a monopoly. According to reports, the US justice department has begun ramping up an antitrust investigation into whether the company has breached competition laws. “Nvidia can, to a degree, both name its own price and terms, so there are some concerns by antitrust officials that the company could be offering perks to those who block-book with them,” Chris says.
The US is also highly concerned about Nvidia selling its chips to China, which, they believe, is using the technology to modernise its military capabilities. With a degree of success, Washington has set up a tech blockade by banning the export of advanced chips – but, as a New York Times investigation found, Nvidia has simply found workarounds and these chips are still ending up in China.
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Is there a bubble?
Nvidia is not like one of the many so-called unicorn tech startups of the last decade that were wildly overvalued while offering very little in the way of goods, services or profit. It has sold hundreds of billions of dollars worth of its product and there continues to be huge demand. But Wall Street analysts are split about its future. “Some are saying it’s a boom stock, others aren’t quite as negative yet but they have started winding down their expectations for growth in the last month or so,” Chris says.
In a situation where there is a bubble – and it does pop – the wider knock-on effect, not just on Nvidia and the tech sector but also on the broader economy, could be significant.
“There is this worry in the air, where people are wondering, are we seeing a replication here of the dotcom bubble,” Chris says. “But we just don’t have the answer right now”.
For more on how technology is shaping our lives, sign up to our weekly TechScape newsletter here, which Chris will be guest-writing for the next month
What else we’ve been reading
“My job is not to get people home”: Emine Saner has a tough but insightful interview with Rob McKeon, a member of the Parole Board, on the difficult decisions he makes each day on the futures of more than 5,000 prisoners in England and Wales. Hannah J Davies, deputy editor, newsletters
Trump was once known for the mocking monikers he gave to his opponents. But the days of “sleepy Joe” seem to be behind us, and it looks like the Democrats are beating him at his own game. Martin Pengelly takes a look at why the Dems have abandoned civility and gone all in on ridicule. Nimo
Overtourism has been in the line of fire of late, making it the perfect time for this piece on how to travel to Lanzarote without causing harm to its environment, or communities. Hannah
Gary Younge’s interview with Diane Abbott on the hostility she has faced throughout her storied career and her battle against her own party this year is a must read. Nimo
A listening pick to start your week, and this episode of the Audio Long Read on ADHD diagnoses. While they seem to be increasingly common for adults, identifying and treating the disorder in children can be a complicated process, as writer and doctor Jack Goulder explains. Hannah
Sport
Paris 2024 | Great Britain are celebrating another stellar performance at the Paralympic Games with as many medals as in Tokyo three years ago but more golds, amid a warning “not to take our eyes off the ball” as the global level of competition continues to rise. Last night also marked the end of the Games, with France waving goodbye to the summer of athletics with “one last frenzied night of celebration”, as Angelique Chrisafis wrote at Stade de France.
Super Bowl | Kendrick Lamar will headline the Super Bowl half-time show in New Orleans in February. “Rap music is still the most impactful genre to date,” Lamar said in a statement. “And I’ll be there to remind the world why. They got the right one.”
Cycling | 28-year-old Welsh rider Steve Williams won the 2024 Tour of Britain, while Matevz Govekar claimed victory in the frantic final stage.
The front pages
The Guardian splashes on “Scores of MPs could refuse to back Starmer over cut in fuel payments”, while the Times says “Starmer to give winter fuel rebels short shrift” and the Daily Mail leads with “Labour said cutting OAP winter fuel cash could kill 4,000”. The Daily Express’ front page reads “Axing of winter fuel payments was ‘cruel planned betrayal’”, the i goes with “Ministers consider plans for cheaper energy bills – as Starmer faces winter fuel anger” and the Daily Telegraph says “NHS in decline for first time in 50 years”. Daily Mirror leads with Letby inquiry exclusive: the deadly link” while the Financial Times splashes on “US companies pile into debt market as hedge against election turbulence” and the Metro headlines “Day of truth over mental health ‘cull’”.
Today in Focus
The man who fell to Earth
Twenty-three years after Mohammed Ayaz fell from a plane wheel bay as it descended to Heathrow airport, his brother visits the car park where his body was found. Esther Addley reports.
Cartoon of the day | Edith Pritchett
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The Upside
A bit of good news to remind you that the world’s not all bad
Single people looking for love seem to have two choices these days: doomscrolling on dating apps, or trawling social media in the hope of finding someone special.
But some singletons have found another way to meet people: “hobby apps”. Rather than braving the wild west of the Twittersphere, would-be lovers are finding like-minded people on specialist platforms like the running app Strava or book review site Goodreads. You’re guaranteed to meet people who share your passions, and it’s a much less combative space.
Dr Carolina Are of Northumbria University, says: “Dating apps seem like a dating supermarket. A lot of people are becoming quite disillusioned with the fact you’re judged on looks.” But hobby apps, she says, are “a way for people to connect via common interests”. It’s not just for those looking for love, too: they’re also a great way to find friends and community.
Sign up here for a weekly roundup of The Upside, sent to you every Sunday
Bored at work?
And finally, the Guardian’s puzzles are here to keep you entertained throughout the day. Until tomorrow.
