HomeMARKETSNvidia AI Risk to S&P 500 Rally as Amazon Banks on Alexa...

Nvidia AI Risk to S&P 500 Rally as Amazon Banks on Alexa AI Upgrade

Nvidia (NVDA) has been the poster child of the artificial intelligence frenzy over the past year. The stock has risen by over 200% as it becomes clear it is at the forefront of the AI race. It has remained a Wall Street darling owing to its H100 chips specifically designed for data centres that train neural networks and other forms of generative AI.

Nvidia Implosion

The company’s chips have been in high demand from some of the biggest data centre operators, including Google Meta Platforms and Amazon, which are also at the forefront of the AI race. Tesla has also been buying AI chips at a high rate as it looks to secure essential supplies as it seeks to remain ahead of the competition.

Amid the strong demand for Nvidia chips to power the artificial intelligence race, the risk the company poses to the overall stock market is becoming increasingly apparent. The stock coming under pressure and wiping close to $430 billion in market value in under three days is already sending shockwaves in the markets. If the stock continues to drop, it will be tough for the S&P 500 to continue rising, as has been the case for the better part of the year.

While the recent drop is mainly attributed to profit-taking on Nvidia stock rallying, there are growing concerns about demand for the company’s chips. Talk that spending on AI data centres has peaked could hurt the stock’s sentiments and trigger a further pullback.

Amazon Alexa AI Revamp

Meanwhile, reports indicate that Amazon is contemplating cutting investment in its AI Alexa division if there is no significant loss reduction. The Alexa segment has been facing financial difficulties for a long time, with 2022 alone seeing a reported loss of $5 billion. However, two job cuts in 2022 and 2023 have somewhat slowed the losses. The newest focus on artificial intelligence will have to lead to income generation quickly.

The tech giant has been pushing for the profitability of the divisions. Part of the plan involves offering a powered version of the virtual assistant for between $5 and $10. Powered by AI, the revamped Alexa provides a more personalized experience for customers to perform more complex tasks than the previous version could. In this case, Alexa could write emails, order food and even make coffee.

While many Alexa devices are out of service, there is a strong belief that if only one in five is active with a user, it could translate to about 100 million users. This scenario would lead to a potential active user base of 100 million. Furthermore, if 10% of these active users were prepared to pay $5 monthly for Alexa services, Amazon could see an additional $600 million annual income.

Should the price increase to $10 monthly, the potential income could rise to $1.2 billion. This suggests that Amazon could earn between $600 million and $1.2 billion more in extra income from Alexa’s AI capabilities, even with a modest device usage level.


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