Impact of NVIDIA scandal on Silicon Valley & AI industry

Well, the entire AI industry is connected to NVIDIA in some way. Its GPUs or chips are used by just about all AI companies and have powered the AI revolution so far. So for more on how Silicon Valley is responding to this shakeup, let's welcome Gil Luria. He is the managing director and head of technology research at D.A. Davidson. Thanks for being here this morning. Thank you, Holly. NVIDIA announced that its current chief financial officer will serve as interim CEO, but this company has no clear successor. Wang had a lot of control over the company. More than 60 people would report directly to him. So now that he's gone, how does this company remain competitive? Well, the products are still very good products, right? Jensen Wang doesn't actually make the chips themselves. He has built this company, and the company wouldn't be where it is without Jensen Wang. In fact, the whole AI ecosystem wouldn't be where it is without Jensen Wang. But going forward, there are plenty of people that could leave this company and continue to be successful. The analogy here is when Steve Jobs stepped down, that doesn't mean that when Tim Cook had great success, that doesn't mean that Tim Cook would have been able to build Apple. He could step into the company that he got to inherit, and he led it to further success. And that's the situation here. The big difference is that this is not gonna be an orderly transition. Mr. Wang had to leave abruptly, and the replacement's gonna have to be recruited, likely externally. And there's gonna be some disruption here. The chips are still the most cost-effective chips. That's why all NVIDIA's customers buy them. They didn't buy them as the favorite of Jensen Huang. They bought them because AI runs better on NVIDIA chips than on any other chips. So long-term, you think there will still be some stability for this company, but maybe a few bumps in the road to get to that point. NVIDIA is one of the wealthiest companies in the world. Its chips, as you mentioned, power the AI economy. So how concerned should we be that this, that turbulence we just mentioned, could affect other tech companies? So the biggest risk to Nvidia is that their sales to Asia will be limited because of what you just talked about earlier in the show, which is many of their sales to companies in Singapore and possibly Taiwan ended up in China, which they were not supposed to. That may have to stop, that could impact their results. Having said that, the demand for AI chips now is so great that they'll be able to sell those same chips to American companies and Western companies without having to sell into Asia. Now that NVIDIA is going to be disrupted at least somewhat by this transition by possible restrictions in Asia, that bodes well for other technology companies like Broadcom or AMD or ARM that now have the ability to compete on more even footing because there's no Jensen Wong leading the way. Okay, so... So the competitive situation will get a little tougher for NVIDIA, but again, it's still very well situated. Fantastic team, well beyond Jensen Huang. Colette Crest can handle the transition. Although, again, I believe that likely the CEO will come from an external hire as opposed to an internal hire. One of NVIDIA's major partners is Anthropic. NVIDIA agreed to invest about $10 billion in Anthropic ahead of its IPO. Do you see this transition affecting Anthropic's plans at all? I don't think it impacts Anthropic's plans because it doesn't really need that 10 billion. Anthropic already has more than 100 billion on the balance sheet and will likely be able to raise 20 to 30 billion from other anchor investors and another 70 billion from institutional and individual investors. They're going to be just fine. It's unclear that NVIDIA will be able to follow through on this investment without Jensen Wang, because it's going to be hard for an interim CEO to approve such a big check. But it shouldn't impact Anthropic. Anthropic's success, the success of the IPO depends on how much the market is receptive to AI right now and how well that IPO is priced. All right. Thank you for your insight and your time this morning, Gil Luria, Managing Director and Head of Technology Research at DA Davidson. We appreciate it. Thank you.