OpenAI CEO Sam Altman says artificial intelligence has entered the "singularity," a stage where AI progress could accelerate rapidly.
While that description can prove premature, increasingly capable models could still boost demand for Nvidia's (NVDA +3.44%) AI-optimized hardware and software offerings and Microsoft's (MSFT -1.09%) cloud and software products.
Image source: Getty Images.
What Sam Altman means by the "singularity"
On the Relentless podcast, Sam Altman said, "We're now, like, in the singularity." In its traditional sense, the singularity is the point in time when AI begins creating increasingly intelligent systems so quickly that progress becomes difficult for humans to predict or control.
Altman appears to be using "singularity" more broadly. Current AI can write code, find security flaws, and help researchers improve models. But there is no public evidence that it can independently design, train, and deploy increasingly capable successor systems.
OpenAI still treats AI self-improvement as an advanced capability that models must be tested for, rather than something they can already do reliably. Anthropic treats fully automated AI research and rapid acceleration in AI development as risks to monitor rather than established milestones.
Nvidia could win before the singularity arrives
More capable AI models can increase the computing needed both to build them and to run them. This, in turn, drives demand for advanced processing and networking chips and high bandwidth memory.
NASDAQ: NVDA
Key Data Points
Nvidia is already benefiting from this trend. In the first quarter of fiscal 2027 (ending April 26, 2026), data center revenue rose 92% year over year to $75.2 billion. The company claimed that its new Dynamo software can help Blackwell chips process AI requests up to 7 times faster. The company's next-generation Vera Rubin systems are also moving into full production to run AI agents that handle longer and more complex tasks.
While increasing efficiency can limit Nvidia's growth by requiring fewer chips, lower costs could encourage much wider use of AI agents and reasoning models. Hence, Nvidia will benefit only if overall AI usage grows faster than the pace at which computing becomes more efficient. Custom chips from Microsoft, Alphabet, and Amazon add another competitive risk.
Microsoft can also turn stronger AI into revenue
Microsoft can monetize stronger AI through Azure cloud infrastructure, its stake in OpenAI, and Microsoft 365 Copilot.
NASDAQ: MSFT
Key Data Points
The AI business is already gaining traction. In the fourth quarter of fiscal 2026 (ending June 30, 2026), Azure and other cloud services revenue rose 43% year over year. Microsoft 365 Copilot also surpassed 30 million paid users.
Microsoft does not own OpenAI, but is a primary cloud partner and a major shareholder. Microsoft will also receive a share of OpenAI's revenue through 2030 and can use its models and products under a nonexclusive license through 2032.
Microsoft, however, must balance the cost of supporting its AI growth. The company spent $35.8 billion on property, plant, and equipment expenses in the fourth quarter, more than double the amount in the same quarter of the prior year. Hence, the company needs to generate enough revenue to cover these rising infrastructure costs and deliver attractive returns.
Which stock benefits more?
Nvidia and Microsoft are trading at 15.6 times and 20.3 times their forward earnings, respectively.
Nvidia looks more attractive today, provided overall AI usage continues to grow faster than improvements in computing efficiency and competition from custom chips.
