Eric Schmidt, who led Google for a decade, he told Stanford students that while he’s not one to give investment advice, he sees an obvious play in the stock market that doesn’t involve buying his former employer’s stock.
Schmidt said, in a video posted by Stanford this week that has since been removed, that big tech companies are planning ever-larger investments in Nvidia-based on artificial intelligence data centers, which could cost up to $300 billion to build.
“I’m talking to the big companies, and the big companies are telling me they need $20 billion, $50 billion, $100 billion — very, very hard,” Schmidt said, adding that he is “close friends” with OpenAI CEO Sam Altman.
Schmidt suggested that a huge amount of that spending would go to Nvidia, which makes the dominant data center artificial intelligence chips and has already seen revenue grow by more than 200% for three straight quarters. Google has developed chips called Tensor Processing Units (TPUs), which could compete with Nvidia’s processors, but they are still at a very early stage.
“If $300 billion is all going to Nvidia, you know what to do in the stock market,” Schmidt said. “This is not a stock recommendation.” Schmidt did not say whether he owns Nvidia stock.
Schmidt, who was Google’s CEO from 2001 to 2011 and remained on the board until 2019, was addressing a class of undergraduates on the topic of artificial intelligence. He he said the Wall Street Journal that it asked for the video to be removed because it had misrepresented Google’s relaxed work culture at the meeting.
However, his candid remarks illustrate the driving force behind Nvidia’s rise and the company’s centrality to the artificial intelligence boom that begins in late 2022.
While Nvidia is seeing soaring demand from cloud companies and leading AI model developers, Wall Street is asking whether the chipmaker’s top customers are overspending on AI infrastructure. Nvidia will provide its latest update to the market when it reports quarterly results on August 28
Schmidt suggested that Nvidia won’t be the only winner in AI, but there aren’t many other obvious choices. He said he currently believes that large companies that can invest more money in Nvidia chips and data centers will gain a technological edge over smaller competitors that cannot spend as freely.
“Right now, the gap between the frontier models — there are only three — and everything else seems to be getting bigger,” Schmidt said. “Six months ago, I was convinced that the gap was getting smaller, so I invested a lot of money in the small companies. Now I’m not so sure.”
After CEO Mark Zuckerberg, whose company has bought about 600,000 expensive Nvidia GPUs, said earlier this month that Meta’s next-generation model — in the Llama family — will require access to about 10 times the amount of computing power.
“And future models will continue to develop beyond that,” Zuckerberg said on an earnings call.
Altman, meanwhile, is according to information works with the main supporter of OpenAI Microsoft to build a $100 billion AI data center called “Stargate.”
“When Microsoft did the deal with OpenAI, I thought it was the dumbest idea I’d ever heard, essentially handing over your AI leadership to OpenAI and Sam and his team,” Schmidt said. “And yet, they’re on their way to becoming the most valuable company.”
Schmidt said it will be difficult for competitors to catch up with Nvidia because many of the most important open source tools used by AI developers are based on the company’s CUDA programming language. He said AMD’s software that translates Nvidia’s CUDA code for its own chips “doesn’t work yet.”
Schmidt, who started venture firm Innovation Endeavors in 2010, still owns about 147 million Alphabet shares, according to Bloombergworth about $24 billion. In addition to investing in startups, he has been a philanthropist and advised several government committees on technology.
CLOCK: Dissolving Google will not affect how it operates
