Nvidia Just Made Another Pair of Brilliant AI Bets

Just when you thought Nvidia (NASDAQ:NVDA | NVDA Price Prediction) and its legendary founder and CEO Jensen Huang had their fill of intriguing AI deals, the GPU titan makes another pair of moves. Undoubtedly, all of the investments across the AI scene might be making some shareholders uneasy, especially as the circularity introduces a more complicated web of risks over time.

Does every deal add to the weight on the shoulders of the AI juggernauts? Or is it merely a way to save both parties a great deal of cash while working together to solve some of the world’s toughest problems?

Could the deal-making act as an accelerant for broader adoption across industries as AI companies target new market verticals? Or will they only raise the expectations bar further, inevitably setting the AI deal-makers up for even more disappointment once it becomes clearer that the ROIs aren’t there, at least over a timeframe that’s acceptable for your average trader.

The AI trade might be on pause, but the boom has a long way to go

Either way, I think the AI boom is alive and well, but with much of the short-term hype fading away, the big question is whether the long-term trajectory is still there and whether it makes sense for investors to hit the buy button now that the near-term is somewhat less hyped while the long-term is as exciting as ever.

While investors may have gotten used to and perhaps bored with large language models (LLMs), I think there’s still a lot of “ChatGPT moments” (like the ones Jensen Huang sees coming as physical AI takes shape) ahead.

Even as firms pull their punches a bit to avoid the sense they’re forcing AI upon users that aren’t ready or willing to adopt it for everyday workflows, I do think that the technology will evolve to a place such that users will go to the AI, rather than having it come to them by being intrusively embedded on the side of a browser or something of the sort.

In any case, Nvidia is the “pick and shovels” play that wants to help companies position themselves in a way such that users choose to embrace (and hopefully pay for) the latest and greatest AI subscriptions. And, in that light, I expect Nvidia to keep making deals (large and small) while spreading its wings across industries and even geographies.

Nvidia’s latest pair of AI infrastructure deals 

The latest pair of bets made by Nvidia may seem less remarkable, especially when you compare the non-stop dealmaking the firm has made in recent months. Still, as Nvidia looks to bet big on not only AI inference but also infrastructure, as AI innovators look to move through notable bottlenecks, I think it’s about time to start getting bullish on Nvidia shares again.

In case you missed it, the GPU giant put $4 billion (a rather small amount by Nvidia’s standards!) into photonic innovators Lumentum (NASDAQ:LITE) and Coherent (NASDAQ:COHR). As the industry levels up from copper wire to silicon photonics (think optical cable), the two firms stand out as critical infrastructure providers that could help remove more hurdles standing in the way of more rapid AI advancement. Lumentum is a high-powered laser player, while Coherent is the optical transceiver.

While the pair of high-tech innovators holds tremendous growth promise as AI infrastructure evolves to become faster and more efficient, I’m not at all comfortable with chasing either name on recent strength. They’re too hot to handle right here, especially as the tech trade loses a bit of steam.

In any case, the pair of deals might not just be a great investment, but one that could help the AI revolution power ahead at a faster pace. Either way, the bet looks smart, but comes at a fairly high price of admission. Shares of both LITE and COHR have gone parabolic in the past year, and that’s sure to raise concerns that such deals are adding more air to an AI bubble.