Since ChatGPT launched in November 2022, we’ve learned a few things about it’s capabilities:

  • It passed an exam at the University of Pennsylvania’s Wharton School of Business, earning a grade worthy of a B or B-.
  • Someone used it to write and publish a children’s book in 72 hours.
  • Buzzfeed Inc. (BZFD) announced in January that it was going to have ChatGPT create quizzes and write “listicles,” which consequently sent the stock price up more than 100% in a day.

With an estimated 100 million users as of January, ChatGPT is sure to bring us even more interesting examples of its creative potential.

But being a natural tinkerer — someone who would take apart toy race cars as a kid and modify them to try to get them to go faster — I have always felt the need to know how things work and what is “under the hood.” So, while most people are fascinated by what ChatGPT can do, I’m more interested in HOW it can do something like help someone write an entire book… and what connected AI investment opportunities exist.

The answer to both questions lies within a $10,000 artificial intelligence chip called the A100. This chip allows things like AI image generators and chatbots to produce content — and the companies creating these generative AI models need hundreds or thousands of these chips from the company I’m about to share with you.

According to our Health Indicator, this company just triggered a buy signal, entering the Green Zone on Feb. 21.

Here’s everything you need to know.

The Firepower Behind AI Expansion
Nvidia Corp. (NVDA) was founded in 1993 with the vision to bring 3D graphics to the gaming market.

Fast forward to today and it has fulfilled and surpassed that vision, creating graphics processing units (GPUs) to power cryptocurrency mining and gaming as well as chip systems for robotics, vehicles, and other tools.

And as you may have guessed, Nvidia is the company that sells the $10,000 A100 chip.

It also sells the DGX A100, which is eight A100 GPUs working together.

The DGX A100 has a suggested price of $200,000, and research firm New Street Research estimates that the ChatGPT model inside the search engine Bing (owned by Microsoft Corp. [MSFT]) could need eight GPUs to answer a question in less than a second.

In order for Bing to provide this service to all of its users, it would require more than 20,000 8-GPU servers, which could cost Microsoft $4 billion.

The investment bank Citigroup projects that ChatGPT usage alone could bring Nvidia $3 billion to $11 billion in sales by the end of 2023.

Nvidia also isn’t resting on its victories with the A100. It began producing the H100 in September 2022, which offers up to 30 times better performance for AI workloads than the A100.

Putting It All Together
NVDA triggered an Entry Signal on Feb. 21, suggesting that now is the time to make an investment.

In addition, NVDA has earned a favorable ranking from our brand-new TradeSmith Business Quality Score, which ranks every company based on a composite of four broad quality metrics:

  • Growth: This metric measures changes in a company’s metrics such as sales, profit, return on equity (ROE), return on assets (ROA), and cash flow over the past five years.
  • Profitability: This metric measures a company’s current level of profitability relative to its assets, sales, and shareholder equity.
  • Safety: This metric measures a company’s financial strength (debt burden, credit risk, etc.) and its stock’s historical volatility versus the overall market.
  • Payout: This metric measures how much of what a company earns benefits shareholders via dividends, net share buybacks, and debt repayment.

Our algorithms first calculate the current quality score for each stock compared to its history and all other stocks in our database. They then average those scores for each stock and rank them from the highest quality (100) to the lowest quality (0).

Nvidia has a stellar score of 91.

Bottom line: Nvidia has 95% of the market share for graphic processors that can be used for machine learning, and it’s a company that has shown it knows how to innovate to keep up with what’s next. With an Entry Signal triggered a little over a week ago, backed up with a Business Quality Score of 91, our tools and systems are saying that now is the time to buy NVDA.

— Keith Kaplan

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Source: TradeSmith