[Column] Michiel Frackers: Nvidia the world's most valuable company And Ethereum is following Bitcoin

' Something often has to happen before something happens.' It is one of my favorite quotes from Johan Cruijff. I was reminded of it last week when stock market analysts, a professional group with the same social utility as palm readers and coffee grounds viewers, predicted that Nvidia could overtake Apple and Microsoft as the most valuable company in the world this year .

Without an analysis of why and how this is possible, it is scoreboard journalism of the worst kind. The enormous price increase of Bitcoin to the highest level ever is of course preferred to be kept quiet by most stock market analysts. While that price is only based on supply and demand, without underlying products such as Nvidia. Seems a lot easier to analyze. Yet most analysts remain silent. Chance? No, because coincidence is logical, Cruijff already said.

In a half-baked attempt at self-analysis, I looked up what I have written about Apple, Microsoft and Nvidia since I started this newsletter a year ago. Together with OpenAI, maker of the revolutionary ChatGPT, they are the only companies I have reviewed more than thirty times.

Nvidia is more than hardware

Looking back, it is clear that I myself had difficulty understanding what the lead that Nvidia has built up consisted of; because the gap with the competition is caused by much more than just the production of very fast processors, the Graphics Processing Unit (GPUs) that form the engine block of the AI software.

This newsletter is too short and I lack the technical expertise to delve deeply into the 'software shell' that Nvidia has almost secretly built around its hardware, making it more complex than it seems for customers to achieve the same results with equipment from other suppliers. achieve. But it's worth keeping in mind when another analyst blabs that Google, Microsoft, and Amazon will deliver comparable performance to Nvidia within a few years.

Because in addition to designing and delivering performance in a laboratory, these types of AI applications must be tested in the real world for all kinds of different applications, after which optimization follows (I don't think it's a Mulisch-like argument myself, but stick with me ) and finally, a chip manufacturer must still be able to produce the GPUs in volume and support them after sales. Producing, selling and supporting is perhaps more difficult than designing. In principle I am also a very good singer, but in practice my dog runs away after hearing three notes.

Every day, Nvidia increases its knowledge lead, because it has been working with all those AI customers for years. While Google, Microsoft and Amazon are still on the user side. It is as if, as a customer at the bakery, you decide to start your own bakery one day. Then the business plan and the recipes are not the parts that make the difference: the crux is in making and selling, which applies to baking croissants and computer chips.

Conclusion: Nvidia has a good chance of adding another trillion in market value within a year and dethroning Apple and Microsoft as the most valuable company in the world. A position that it will be able to maintain for a while. Once Nvidia has surpassed Apple and Microsoft in terms of corporate value, the general public (and therefore most media and politicians) will only begin to understand that a social breakthrough has occurred.

I do not claim, as is sometimes suggested, that AI is a breakthrough comparable to the invention of the steam engine. This was the case with the invention of the personal computer in combination with the Internet, which caused a large part of the world to transition from an industrial to a digital society. There is a significant chance that mass adoption of AI applications will have the same impact on society as the introduction of the assembly line once did. In other words, higher labor productivity that is linked to fewer process-related jobs, fewer working hours and shorter working weeks for most desk jockeys. The question is whether the average salary will remain the same, or whether higher corporate profits will be opted for.

AI in the old people's home

The applications of AI extend much further than initially thought. Naturally, many administrative functions, in fact all process-related functions where an estimate is made based on existing data, will be replaced by AI. That dusty insurance salesman who comes by in the evening after dinner in his ill-fitting suit with a questionable tie is worse at interpreting the customer's requirements than an AI application that stores all current policies and all claims from the last fifty years.

It is reminiscent of the breakthrough of the World Wide Web in 1993 after the launch of the Mosaic browser and the period fifteen years ago, after the first iPhones and Android phones were introduced. The last two innovations, smartphones and the internet, form the basis for the current technological revolution, because that is what we now have to call AI. Just as a mobile app was developed for everything at the time, efforts are now being made to incorporate AI into everything.

There is grandma, in a home with an AI doll on her lap.

Some wonderful innovations were presented at MWC in Barcelona, with the AI-powered dolls for the elderly making an indelible impression on many visitors. Anyone who doesn't think $3,500 for an Apple Vision Pro is expensive will probably buy grandma a $1,800 Hyodol , right? Seems absurd, but the AI bot in the guise of a six-year-old child turns out to be more effective at reminding grandma to take a pill, keep moving and turn off the stove.

Innovation is difficult for everyone

Most innovations in the AI field will fail, just as the majority of all innovations fail. Fortunately, Apple has stopped developing its own car and writes off the $10 billion invested as a rounding after the decimal point. The world absolutely did not need a new car manufacturer. It will be interesting to see if Apple manages to usefully incorporate AI into the company's biggest moneymaker: the iPhone.

There is a lot of pretending that Google has heard the chef whistling in the AI field because he does not know where the spoon is, but that is nonsense. Google has taken major steps in terms of content and Google Gemini was a giant step. Only Google's corporate culture appears to be unruly and not functional when developing groundbreaking innovations, as I described last two weeks.

Lawyer David Kiferbaum left and wrote a painful account of what it's like to work in an environment that favors political correctness over factual correctness. Recommended reading: How Google blew up . (By the way, Kiferbaum's LinkedIn shows that he also worked for a while at Morrison & Foerster, the law firm with the most appropriate URL ever: mofo.com )

Spotlight 9? Two Spotlights: Bitcoin and Ethereum

It was déjà vu, all over again , as the American quote machine Yogi Berra once said: Bitcoin reached a new all-time high and then a hard correction followed.

Subsequently, the most frequently asked question on WhatsApp, during birthdays and in football canteens was: is it too late to get into crypto?

I don't think it's too late to get involved and that we are just at the beginning of mass adoption. Once again I repeat the 2017 advice, which is a few hype cycles ago, from legendary investor Fred Wilson (Twitter, Tumblr, Zynga, Etsy, Coinbase etc), which he gave based on the investor's profile:

young, aggressive risk taker – 10%of net worth in crypto
experienced investor looking for a high-performing portfolio – 5%of net assets in crypto
average investor, somewhat conservative, but with some risk appetite – 3%of net assets in crypto
retiree who wants to preserve the value of the portfolio and generate income – 0%of net assets in crypto

A detailed, careful and at the same time confusing typology. After all, some elderly people could very well suffer a serious dent because their house has already been paid off, including the geraniums. While many young, aggressive risk-takers have to sell their textbooks and become Uber drivers or Only Fans-ers if they see their meme coins evaporate.

Because I don't know any young aggressive guys who manage to limit their crypto gambles to 10% of their net assets, as Wilson advises. Around me I see young people investing 90% of their money in crypto, but that could be a genetic abnormality in my family. More research is needed on women's investment decisions; Are there still fewer women than men in crypto, or are women smarter, because quieter about it?

How much and in which crypto?

When people ask me how much they should invest in crypto, and that has been every day since the beginning of this year, I always answer with a counter question: can you handle seeing everything you invest in crypto go up in smoke? Evaporate to nothing? And just as important: will you argue with your partner if you lose everything?

The few crazy go-getters that are left always ask the same follow-up question: 'which crypto should I buy?' Fred Wilson was also kind enough to answer that question :

“A diverse set of crypto assets would include Bitcoin, Ethereum, the other major layer-one blockchains (Solana, Flow, Avalanche, Polkadot, Algorand, etc.), the major DeFi protocols (Uniswap, Aave, Compound, etc.), storage protocols (Filecoin, Arweave, etc.), telecommunications protocols (such as Helium), some layer-two protocols (such as Stacks, Polygon, etc.), some gaming assets (such as Axie, Decentraland, etc.) and maybe some NFTs.”

Do I follow Wilson's advice myself? No.

The difference in value

I have been convinced for years that “something huge” will come from blockchain innovations. Decentralization and transparency bring an intrinsic new value that cannot be realized in other ways. Unfortunately, it will take longer than I had hoped for a widely accessible application based on blockchain technology to become available that is relevant to a large audience. Call it the ChatGPT of blockchain, that's what we're waiting for. Such an application would be of great social value.

I strongly believe in the crypto market, but I don't (anymore) have the guts to think that I can pick the winners. This has proven difficult with every disruptive advancement in technology. The challenge is to identify possible winners early. This results in the financial value of an innovation; incredibly fascinating, but less interesting for me personally. Before you know it, you'll be musing for hours about peaks, valleys and candles, without knowing which application it actually concerns.

Naturally, every investor wants to achieve the highest possible return with the lowest possible risk, so perhaps I should create an investment portfolio myself that can be followed weekly. I would like to hear via email, LinkedIn or X whether you would find such a portfolio interesting. In any case, all tips, comments and reactions are very welcome.

Michiel Frackers is the Chairman of Bluenote and Chairman of Blue City Solutions

www.bluenote.world
www.bluecity.solutions

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