Few people elicit as strong a reaction as Elon Musk. outspokenness Tesla The founder likes to make bold statements and huge promises – promises he doesn’t always keep, much to the chagrin of Tesla investors. Add to that his activity on social media, and he is often a divisive figure.

One thing that cannot be denied is that Musk has a vision. That – and a huge net worth – make him capable of marshaling enormous resources to accomplish incredible tasks. Look no further than the recent successful “capture” of a rocket booster executed by his company, SpaceX. And while that’s truly an incredible feat, Musk recently pulled off something else that left Nvidia (NVDA 0.80%) CEO Jensen Huang was deeply impressed.

Musk built one of the fastest supercomputers in the world

While X, Tesla and SpaceX make headlines, Musk artificial intelligence (AI) to start upxAI, recently built what could be the most powerful AI training supercomputer on the market. Dubbed “Colossus,” the supercomputer will be used to train Grok, a large language model (LLM) and the company’s answer to ChatGPT. The LLM will initially be available to paying X customers, but many believe Grok will eventually power Tesla’s humanoid robots. Sounds like science fiction, right? This is not the case.

Here’s the problem: xAI built the installation in a few months, but installed 100,000 Nvidia H100s in just 19 days. The Nvidia chief was recently interviewed about the installation, and it was clear that it was something he had never seen, calling it “superhuman” and “incredible.” For what? According to Huang, this is a process that would normally take years.

But Musk isn’t done. It plans to install an additional 50,000 H200s in the coming months, doubling its current capacity. While nothing official has been announced, I wouldn’t be surprised if it’s first on the list for Nvidia’s B200, which hasn’t been released yet. xAI has spent a few billion on the project so far and at $25,000 a piece, it’s estimated that $2.5 billion was spent just on the H100 chips themselves.

While Musk and xAI’s feat is undeniably impressive, I would take Huang’s statements with a grain of salt. CEOs of companies that do billions of dollars in business together tend to be very complementary to each other, and like Musk, Huang isn’t shy about making bold claims.

This is great news for Nvidia

The whole project shows how companies are willing to do anything to win the AI ​​arms race – companies with billions to spend. During the latest quarterly earnings release, the CEOs of the biggest tech companies reiterated that losing is not an option and that they will continue to spend whatever it takes to win. Alphabet CEO Sundar Pichai put it bluntly: “For us, the risk of underinvesting is significantly greater than the risk of overinvesting.” That’s why the company plans to spend about $50 billion this year on capital expenditures, up from $31 billion the year before, with much of it going toward AI infrastructure and Nvidia chips.

As I mentioned earlier, Nvidia is preparing to launch Blackwell, the latest iteration of its flagship AI chips. While they haven’t hit the market yet, they’ve reportedly been out of stock for at least a year, and as we’re seeing with Colossus, demand is still extremely high for the company’s current iteration of chips.

Nvidia faces competition. AMD is set to launch its new chip, the MI325X, this quarter, but it has yet to significantly eat away at Nvidia’s market share. AMD is still about a year behind Nvidia at the moment since the MI325X will compete with the H200, not the B200. And given that Nvidia is able to spend about twice as much as AMD on research and development, it will be difficult for it to close the gap anytime soon.

Nvidia’s gap is significant at this point and I see no reason for that to change next year. However, the company’s stock is trading at all-time highs and it is currently showing a price/earnings ratio (P/E) of 67. This is a significant bonus. If you are a risk-averse investor, perhaps you are close to retirementfor example — I would exercise caution. But overall, with the growth Nvidia is expected to see in the coming years, I think its current valuation is justified.