Should You Follow This Billionaire Into Nvidia?

Billionaires tend to be especially skilled at spotting seismic shifts in industries before the crowd catches on. Recently, one stock has managed to capture the imagination of both a cautious billionaire and aggressive hedge fund managers alike, a company that sits at the very heart of artificial intelligence Nvidia.

Key Points

• David Tepper dramatically increased their Nvidia stakes, signaling conviction that the company’s growth story in AI is far from over.

• Its GPUs, CUDA ecosystem, and dominance in both AI training and inference give Nvidia a platform-like advantage that competitors struggle to replicate.

• Despite a rich valuation, Nvidia projects AI infrastructure spending could hit $4 trillion by 2030.

Billionaire Conviction

David Tepper of Appaloosa Management, famous for his contrarian bets on beaten-down financials during the 2008 crisis, runs a concentrated, opportunistic book. And he has been loading up on Nvidia.

Tepper boosted his stake by nearly fivefold in a single quarter, amassing 1.75 million shares, now 4.3% of his portfolio, but why?

Nvidia’s Edge in AI

Nvidia’s graphics processing units have become the foundation of modern AI. Originally designed to accelerate video games, GPUs turned out to be remarkably well-suited for machine learning.

Training a large language model like GPT-4 requires trillions of calculations in parallel, something Nvidia’s CUDA software ecosystem and specialized chips were uniquely built for.

What many don’t realize is just how deep Nvidia’s moat runs. More than 4 million developers now use CUDA, locking in a software ecosystem that competitors struggle to replicate.

And Nvidia’s H100 and upcoming Blackwell chips are not only faster but optimized for inference, the stage where AI models interact with real users.

Scale Few Can Match

The numbers behind Nvidia’s rise are staggering. Revenue has more than tripled year-over-year, crossing into the hundreds of billions annually. Gross margins are north of 70%, something almost unheard of in hardware manufacturing. .

But the more interesting detail is that Tepper may be keying in on, which is Nvidia’s forecast. Management believes AI infrastructure spending could top $4 trillion by 2030.

To put that in perspective, that’s larger than the entire global IT spend today. If Nvidia maintains even a 60% market share, the runway is enormous.

Beyond Data Centers

Investors often frame Nvidia as a “data center story,” but its reach is broader. The company is embedding itself into industries from robotics to healthcare. Its DRIVE platform powers autonomous vehicles.

And NVDA’s Omniverse software aims to simulate factories, cities, and even climate models. And in medicine, researchers are using Nvidia GPUs to accelerate drug discovery pipelines by years.

These emerging businesses don’t yet move the needle financially, but they deepen Nvidia’s role as the backbone of applied AI. That’s a key reason why billionaires are betting Nvidia is the next platform company.

Is It Too Late?

Of course, the elephant in the room is valuation. Nvidia trades nearly 40x times forward earnings, hardly cheap for a mega-cap but that multiple looks less demanding when you consider the growth trajectory.

If revenue doubles again in the next two years, as analysts project, Nvidia’s earnings may well make today’s price look reasonable.

So, Now What?

So, should you follow Tepper into Nvidia? If your goal is to gain exposure to the most important growth trend of the decade, artificial intelligence, it’s hard to argue against it. Nvidia has already proven it can dominate the training era of AI and is positioned to power the next phase, being inference, robotics, and real-world deployment.