Nvidia CEO Jensen Huang speaks during a keynote at Nvidia GTC in San Jose, California, on March 18. The company's chip power systems are used to train and run AI. Photo/AP
Overall, governments and businesses are taking a relatively cautious approach to the AI (artificial intelligence) boom.
But its investment in chipmaker Nvidia, one of artificial intelligence's biggest stars, has paid off.
This will be a major blow to New Zealand pension funds.
As of December 31 last year, our Crown pension fund held 771,114 Nvidia shares worth about US$605 million ($991 million), roughly five times the value disclosed by the fund in June 2021.
By May this year, the fund had slightly increased its holdings to 778,519 shares, but after Nvidia's 10-for-1 stock split earlier this month, its holdings stood at 7,785,190 shares, a NZ Super Fund spokesman confirmed this morning.
NVIDIA, already up 170% this year amid the AI boom, rose another 3.5% today, bringing its market capitalization to $3.34 trillion, surpassing Apple ($3.29 trillion) and Microsoft ($3.20 trillion) to become the world's most valuable company.
With this latest surge, the $75.5 billion NZ Super fund's shares in the semiconductor maker are now worth $1.06 billion, or roughly $1.75 billion.
The superfund also has large holdings in other Magnificent Seven companies, detailing holdings in Apple (valued at $1.4 billion), OpenAI-backed Microsoft ($1.2 billion), Alphabet ($305 million), Tesla ($338 million), Meta ($330 million) and Amazon ($245 million) in a December disclosure.
Will it end in tears?
The Magnificent Seven stands out among overseas stocks superfunds not because it is betting on AI, but because its external manager simply tracks a U.S. index that has come to be dominated by Big Tech.
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Nvidia has seen boom and bust periods in the past thanks to its graphics processing unit chips being used in bitcoin mining and gaming (which has seen a surge during lockdowns). Now, the company's silicon is being used to train and run AI in data centers, some of which have even been renamed “AI factories” to capitalize on the current buzz.
For Nvidia and other chipmakers, demand is likely to be insatiable.
But despite this, the NZ Super Fund has taken a decidedly more aggressive stance than other major funds run by the ACC, which has a more conservative investment remit and is led by a sceptic of the tech boom.
“The U.S. market has seen several big tech stocks rise to the top recently, creating optimism among investors that these stocks are ahead of their sectors and will reap the rewards accordingly – and that may well be the case,” said Paul Dyer, chief investment officer at ACC. Madison Market.
Stocking up on picks and shovels?
Some are cautious, such as veteran US publisher and venture capitalist Pat Keneally, who was in New York recently as a tech prize judge and led IDG Ventures' investment in Netscape, the web browser pioneer that briefly reigned supreme in the 1990s.
“NVIDIA is today's Netscape. We invested in tools,” Kennealy said. Herald.
Similarly, network hardware maker Cisco, considered one of the “Four Horsemen of the Internet” during the dot-com boom, has performed strongly over the past two decades but has proved a volatile stock, never recovering to levels like its 1990s highs after the millennium crash.
Looking at the companies using the tools, Kennealy said, with AI, the companies control the data.
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Chris Keel is based in Auckland HeraldJoined the business team. Herald In 2018, he became technology editor and senior business writer.
