Generative AI has taken the world by storm. ChatGPT amassed millions of users when it was released late in 2022, entertaining many with its random conversational responses to questions. But it can do much more than give simple answers to queries. Many businesses and workers have tapped ChatGPT for help with writing, solving problems, creating art, or even developing software.
Microsoft was an early investor in ChatGPT creator OpenAI and boosted its investment to $10 billion after the AI service's viral success. The media (and Microsoft itself) have been quick to call out risks for Alphabet's Google Search and the lucrative digital advertising business built on it.
Google has responded with some AI chatbot models of its own. It was Google, after all, that helped pioneer the algorithms that services like ChatGPT are built on.
At any rate, only time will tell how disruptive a force ChatGPT ends up being. But the public seems to have missed the real reason ChatGPT matters. Leave it to Nvidia (NVDA 4.35%) CEO Jensen Huang to explain in one simple sentence the real reason generative AI matters so much.
What's Nvidia got to do with ChatGPT anyway?
Before dropping the quote, let's first review why Nvidia matters to this conversation on AI in the first place. At its most basic definition, AI is simply a piece of software. Granted, AI (especially generative AI like ChatGPT) is a complex app that first needs to be trained using a database (like the internet itself) to create algorithmic models it can then use to generate responses to questions.
In nuts-and-bolts terms, that means storing lots of digital information in a remote data center. Also in that data center are thousands of powerful chips that intake a user's question via the internet, calculate and formulate a response, and then send that response back via the internet.
Nvidia's GPUs are the chips powering services like ChatGPT -- especially those chips designed for data centers, which are far and away the leaders in accelerating the time it takes to train an AI model as well as the time to generate a natural-language response.
With ChatGPT unlocking all sorts of new use cases for computers, businesses of all types are suddenly interested in putting the power of generative AI to work in their day-to-day operations.
So if generative AI proves to be more than a fad, Nvidia GPUs and related software will be in high demand in the coming years. Microsoft certainly seems to think it will be, given its big bet on OpenAI and new services that attempt to disrupt Google and the cloud computing industry at large.
What Huang said
But perhaps ChatGPT is something more than a "disruptor" of the current status quo. Rather, generative AI could help form a brand-new industry. On Nvidia's Q4 fiscal 2023 earnings call, Huang called ChatGPT an "inflection point" in computing technology that will have effects as far-reaching as Apple's (NASDAQ: AAPL) release of the iPhone.
How so? An analyst on the call asked for more clarification, and Huang explained generative AI's ability to speak and interpret natural language as well as to translate that natural human language into something far more complex. Specifically, Huang was referring to software code. In reference to ChatGPT's runaway success, he said:
The world now realizes that maybe human language is a perfectly good computer programming language, and that we've democratized computer programming for everyone, almost anyone who could explain in human language a particular task to be performed.
Commoditization of software as we know it?
This is an incredible insight that goes far beyond the oversimplified "Microsoft is going to kill Google Search" argument that has been making its rounds on the news and in the investment community. According to Huang, Generative AI isn't just a disruptor; it's going to help lay the foundation for a new digital economy that can turn anyone into a writer of software.
You see, developing software is an incredibly complex task. It requires knowledge of at least one (if not several) types of software languages to write (or compile) lines of code.
Advances have been made in "low-code" or "no-code" software with which users can create simple apps -- for example, a website using a service such as Wix.com (NASDAQ: WIX). But low-code and no-code platforms are typically pretty simple compared to development of a full-blown application, which requires a team of engineers and developers to program.
But with the advent of generative AI, anyone could potentially will into existence some code by explaining to a chatbot like ChatGPT what they want a piece of software to do. This is perhaps an oversimplified explanation of what ChatGPT and similar services are currently capable of doing right now. Nevertheless, tutorials are popping up all over the place that show how someone with minimal experience in software development can start creating their own digital work.
The sky's the limit from here. For countless non-tech businesses around the world that felt unprepared for a new digital era, software development could now be "democratized" (that is to say, commoditized -- no longer a specialized skill dominated by a select few) as generative AI is hastened into being by ChatGPT.
Nvidia could have the most to gain
If Huang is correct and a new era of easy-to-make apps is upon us, Nvidia could be in position to scoop up massive revenue gains in the years to come. This helps explain the epic rebound in its stock in recent months. Nvidia is gobbling up the majority of a new market that its leading semiconductor designs are helping to enable.
I continue to believe Nvidia will be a wonderful investment over the next decade, even if the stock price has gotten a bit ahead of itself as of late.
