What Nvidia's $20 Billion Groq Deal Tells Us About the State of AI

The day after the Christmas holiday is always a slow market day, but this year it will likely be even slower, as it falls on a Friday and many folks won’t bother to participate. There is little news flow and little data.

The most interesting news is a deal by Nvidia  (NVDA)  to pay $20 billion to private company Groq for a license related to AI inferencing. Inferencing is the step that takes place after AI training. Nvidia’s processing chips help companies gather huge volumes of information. Inferencing allows the data to be processed and makes it useful. Nvidia is ensuring it provides a full-stack of AI development, and the stock is trading higher on the news.

The most interesting aspect of this deal is that it illustrates that AI is still fairly early in its development. There may be some bubble action in certain aspects of AI, such as data centers or large language models, but other areas, like inference, are still at early stages of development, and there will be new winners and losers as evolution continues.

Otherwise, there isn’t much news flow out there. Precious metals continue to trade higher, Bitcoin recovered from a holiday dip, and futures are slightly negative.

Market participants will be primarily focused on making tax moves and positioning for the new year. Many institutional investors have closed the books for the year and won’t be doing much, but there will be some traders looking to play the random action that will occur before the New Year's holiday.

If you are participating, it is important to recognize that the action will be thin and random. While it doesn’t tell us anything about overall market conditions, it may offer some mispricing opportunities if you are willing to dig.

At the time of publication, Rev Shark was long NVDA.