SoftBank CEO Masayoshi Son believes Nvidia (NVDA, Financials) stock is “undervalued,” despite its massive market valuation and the company’s ascent as the second-largest globally.
Son’s hope is focused on his conviction that by 2035 artificial “superintelligence”an AI system 10,000 times more powerful than the human braincould be achieved. According to Son, reaching such a milestone would need for more than 200 million GPU processors and $9 trillion in capital expenditures by businesses funding artificial intelligence.
“I think Nvidia is undervalued because the future is much bigger,” Son said during the Future Investment Initiative conference, foretelling that over the next decade AI expenditure will increase rapidly, thereby strengthening Nvidia’s semiconductor industry.
Son clarified that given the enormous revenues artificial intelligence might provide, even if $9 trillion in expenditure would appear extravagant, it could be a bargain. He calculated that if such artificial intelligence replaces even 5% of the world’s GDP over the next ten years, it might generate as much as $4 trillion in yearly profits.
“I say it’s still very reasonable capex. $9 trillion is not too big, maybe too small,” Son added.
SoftBank has lately refocused on artificial intelligence investments. One of the top firms in artificial intelligence research, OpenAI received $500 million from the Japanese-based investment behemoth for a fundraising round. Apart from its involvement in artificial intelligence projects, SoftBank owns over 90% of Arm Holdings (ARM, Financials), which is poised to introduce its own AI processors next year, therefore establishing SoftBank in the fast changing industry.
Son did, however, also express some misgivings about his past choices regarding Nvidia. Previously owning a 4.9% share in the chipmaker, SoftBank sold it in 2019 for around $4 billion. Given Nvidia’s stock price has skyrocketed since then, that investment would now be worth around $160 billion.
“I had to tearfully sell the shares,” Son said earlier this year, calling Nvidia the fish that got away.
Son thinks Nvidia, a major participant in the industry, is positioned to gain from the increase in AI expenditure as AI firms boost efforts to reach superintelligence.
This article first appeared on GuruFocus.