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Short-term-minded Nvidia (NVDA) investors may have forgotten something in their race to dump the stock after earnings this week: the long-term profit tailwind of sovereign artificial intelligence.
"I think that you're going to hear a lot more about these infrastructure build-outs from nation-states," a16z generator partner and Mistral AI board member Anjney Midha said on chof360 Finance's Opening Bid podcast (see video above or listen below). "Sometimes these are lagging indicators. It might be underreported on — it just takes a while for people to realize that nation-state priorities are then turning into enterprise budgets."
The build-out of AI infrastructure by major countries is beginning to take form in large numbers.
Earlier this month, the European Union earmarked 200 billion euros for investment in AI, including a new European fund of 20 billion euros for AI gigafactories. OpenAI, Oracle (ORCL), and Softbank (SFTBY) said in late January they would invest up to $500 billion in the coming years in an AI infrastructure project called Stargate.
At the core of these build-outs will be high-powered chips made by AI leader Nvidia, experts say.
Read more: How does Nvidia make money?
Nvidia has said Canada, Denmark, and Indonesia have announced initiatives to develop sovereign AI infrastructure powered by its AI chips.
"We think AI models are critical national infrastructure," Midha added. "We think these AI factories that turn tokens into intelligence [are] critical national infrastructure. And I see that segment accelerating."
While sovereign AI represents a long-term profit opportunity for Nvidia, in the near term, the stock could take its cue from a mixed first quarter outlook shared this week.
In its earnings release on Wednesday evening, Nvidia said it expects gross profit margins of 70.6% to 71% in the first quarter as it contends with the production ramp-up of its new Blackwell chip.
The margin outlook of 71% is "a little concerning," Benchmark Company managing director and senior research analyst Cody Acree said on chof360 Finance's Market Domination. "I think that's indicative of more pricing pressure, more competition from AMD (AMD), and more price sensitivity at their customers as they're investing their own dollars to create their own ASICs [application-specific integrated circuits]."
After toggling between gains and losses on Thursday, Nvidia stock closed down 8.48%. The stock rose slightly in premarket trading on Friday.
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