Legendary investor Peter Lynch once famously said, “During the gold rush, there were more people selling shovels than there were people finding gold. Those who profited were the sellers of picks, shovels, Levi’s jeans.” This notion of selling necessary tools in times of popularity remains relevant amidst the AI wave of the past few years. Ultimately, companies selling “necessities” like NVIDIA have become some of the most valuable businesses in the world.
This trend in the tech industry is not new. During the dot-com bubble from 1997 to 2000, the surge in internet-based businesses led to companies selling essential tools like Cisco becoming the most valuable in the world, surpassing even Microsoft at the time. This raises the question of whether the current landscape will repeat history.
A noteworthy perspective comes from former Cisco CEO John Chambers. Reflecting on the similarities between then and now, he acknowledges key differences in the evolution of AI compared to the internet or cloud computing. The market size and growth potential in AI far exceed that of the internet or cloud era. Being the number one company like NVIDIA is today is a different game.
Chambers notes that Jensen Huang, CEO of NVIDIA, is executing a different business strategy than Cisco did back then. While both companies dominate market share and outpace competitors, it is the result of strategic investments made before the market boom. This has propelled them to the number one spot.
TLDR: Selling necessary tools like NVIDIA in the AI era parallels the gold rush mentality of profiting from essential items amidst a booming market, with strategic investments defining success in the competitive landscape.
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