Nvidia Is The Beating Heart Of The AI 'Supercycle': Why Altimeter's Gerstner Has Been Buying Stock In The 'Essential Ingredient' For AI

With all of the craze surrounding ChatGPT, investors are looking for ways to get exposure to artificial intelligence. Altimeter Capital's Brad Gerstner says the best way to do so is by putting money to work in NVIDIA Corp NVDA, which sits at the center of the AI supercycle.

"We've long admired Nvidia, its leader Jensen [Huang] and the role that they play in AI," Gerstner said Thursday afternoon on CNBC's "Fast Money Halftime Report."

The Beating Heart Of The AI Supercycle: There's been a massive acceleration in AI development over the last two years, evidenced by the work Microsoft Corp MSFT is doing with OpenAI, the company behind ChatGPT, Gerstner said. 

Altimeter has been sitting on the sidelines looking for the right entry, he said: "The market, frankly, gave us an opportunity to get into the name in a meaningful way."

He told CNBC that his firm started buying shares of Nvidia in December and continued building the position in January. Although most are worried about macro headwinds and a slowdown in crypto, gaming and data center, Altimeter sees a supercycle for AI on the horizon.

"Building augmented and intelligent applications on top of all the world's data, which is moving into the cloud is a supercycle and Nvidia is the tool, the silicon that sits at the very heart of that supercycle," Gerstner said. 

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Although he didn't expect the stock to move up as fast as it has, it makes sense, he said: "Multiples are expanding off of their all-time lows because of what we've seen in terms of inflation rolling over and the Fed, and number two, the concerns over crypto and gaming are now largely behind us."

Now people are focused on Nvidia's GPUs, and Altimeter sees Nvidia outpacing Street revenue estimates in the back half of 2023. He also noted that Altimeter is ahead of the Street for 2024 and 2025. 

Nvidia's software layer, Cuda, has approximately 3 million developers now building on it, which is being underestimated by most, he said.

"Every single startup that we talk to in the AI space would love to get their hands on H100, would love to get their hands on more compute because it's an essential ingredient to all the AI stuff that you hear us talking about," Gerstner said.

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NVDA Price Action: Nvidia is down 10% over a one-year period, but it's up more than 45% so far in 2023.

The stock gained 3.66% Thursday, closing at $217.09, according to Benzinga Pro.

Photo courtesy of Nvidia.