The Future According to Nvidia's Jensen Huang

In this podcast, Motley Fool analyst David Meier and host Mary Long discuss Nvidia CEO Jensen Huang's CES keynote, plus:

• All "the cool stuff that's coming," from personal supercomputers to self-driving trucks and AI-rendered worlds.
• The rollout of a digital workforce.
• Why Wall Street shrugged at Nvidia's announcements.

Then, Motley Fool analyst Jason Moser joins the podcast for a closer look at PayPal, how the payments processor fell from recent highs, and why CEO Alex Chriss is returning the company to what it does best.

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A full transcript follows the video.

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This video was recorded on Jan. 08, 2025.

Mary Long: There's a party in Las Vegas. You're listening to Motley Fool Money. I'm Mary Long joined on this Wednesday morning this snowy in Denver cold in South Carolina Wednesday morning by David Meier. David, thanks for joining us on Motley Fool Money.

David Meier: Thank you for having me.

Mary Long: Today is going to be the Nvidia show. We've got the Consumer Electronic Show happening in Las Vegas, and yesterday, Nvidia CEO Jensen Huang took the stage. I think it's very fair to say that he's a celebrity of this AI era that we're just beginning to step into. He took, again, the main stage yesterday at the Consumer Electronic Show use that as an opportunity to unveil a lot of new Nvidia developments, many of which we're going to get to throughout today's show, but he also unveiled a slightly new look. Jensen Huang is typically known for wearing a leather jacket. Yesterday, he stepped it up a notch and donned a glittery leather jacket. He even addressed this change when he stepped onto the stage. David, what do you think? Might this be the first fashion trend of the new year? Are we going to start seeing glittery leather jackets, Jensen Huang in shop windows near you?

David Meier: Seriously, you're coming to me for fashion commentary. [laughs] That's definitely a first. But I was reading about that jacket, and apparently, it's incredibly expensive. Maybe only in certain boutiques in certain cities. One of the things I do wonder though, is if it catches on just how fast will fast fashion companies be producing it at lower priced versions.

Mary Long: We'll have to check in on that in a few. Depending on how fast fast fashion companies move weeks, months, days, perhaps. We'll get to the actual technological updates that Nvidia talked about. Jensen Huang opened up this keynote by talking about their new GeForce GPUs. These are graphics processing units mainly made for gamers, creators, developers to make supermega high-quality images for video games. Once upon a time, the gaming segment was Nvidia's biggest revenue source. More recently, that's been largely eclipsed by its data center business just for context. In the last quarter, data centers brought in 18.5 billion dollar in revenue. Gaming brought in just shy of $3 billion. I'm not one to shrug off $3 billion. David, but why does Nvidia continue to focus on its gaming segment when it has so many other fish to fry?

David Meier: Hey. It's the legacy business of the company. I really don't think there is any way that they would stop supporting the gaming industry. I'm a little older. I come from a different era of gaming, and quite frankly, I'm not much of a gamer anymore, but I think Nvidia still loves setting the standards for video quality. The details within the graphics of gaming today are just absolutely incredible and they're only going to get better over time. That's what Nvidia wants to do. It still wants to have that brand cachet, if you will. Plus, you're exactly right, $3 billion is nothing to sneeze at.

Mary Long: Sticking with this consumer side of the announcements yesterday, Nvidia will also be selling a $3,000 AI supercomputer. It's called Digits. It's set to be released in May. It's about the size of a hardcover book. It has about four times the memory of a typical laptop, though it is a desktop, and it can run its own AI models that rival the power of the last version of ChatGPT 3.5. Huang says that if you want to generate even more power to run more complex large language models, you can string two digits together and do just that. What does this mean for people like you and me? My guess is that it's not really for us. If that's the case, who is this souped up personal computer for, and how does that affect Nvidia bottom line?

David Meier: Yeah, frankly, it doesn't mean anything for consumers like you and me. This is not something we put in our home and use as our everyday computer. But to that point, who does use it. As I understand it, this computer is being targeted to researchers, scientists, and students who are actively working with and experimenting with AI models. With these new machines, what they allow those folks to do, is do more work locally, thinking literally, instead of accessing a data center or some cloud computing, they can create their model, create their agent, create whatever they're going to test, and then test it literally on their desktop.

Then what they can do that way, they can see what's going on? How does it react? What are the bugs? What do I need to change? Make the changes, continue to go through that process before rolling it out into a cloud or data center environment. Essentially, it makes them more productive. It's potentially a cheaper way to do it, and it's easier to use before getting that model trained on Nvidia hardware on the desktop before it goes and uses Nvidia hardware in the data center.

Mary Long: Another focus of not just the keynote, but CES more broadly, has been self driving. Huang during the keynote predicted that self-driving vehicles will become the first multi trillion dollar robotics industry. Toyota is just one company that's partnering with Nvidia. They're going to make their entire next generation of cars with Nvidia hardware and software, but self-driving is not just for consumers. Another company highlighted, CES has been Aurora. They build Autonomous shipping trucks, and they're going to be partnering with Nvidia to use the company's drive OS system to power long-haul truckers. Fool self-driving in consumer vehicles has already proven more elusive than we've expected. Why is the tech so different for trucking?

David Meier: First off, let's just set the stage clearly here. Autonomous driving is a very difficult problem to solve no matter what vehicle you're implementing it in. In fact, Aurora has had to push back the launch of its plans to get trucks on the road recently because it wasn't quite ready. With that being said, one of the differences between what Aurora is doing on the trucking side, and say somebody like Tesla is doing on the consumer vehicle side is that Aurora incorporates LiDAR Technology. LiDAR stands for light detection and ranging. Translated into more simpler English, basically, it can create a 3D map of a surface that it's looking at. The thinking here with the partnership between Aurora and Nvidia is that Nvidia chips and software can help Aurora's trucks process that information more quickly and more accurately in order to ensure that the truck not only makes the right decisions, but it does so safely. That is one of the biggest things both on the consumer side as well as the commercial side that regulators look for. How are we going to make sure that all these Autonomous driving vehicles do so safely?

Mary Long: Huang also heralded in a couple of new AI eras. One of those eras he called Agentic AI. This is all about models that act rather than merely tell. ChatGPT tells and agentic AI would then go do what we tell it to do. There was a video voiceover that accompanied the explanation of this, and a line stuck out to me. The voiceover said, "AI agents are the new digital workforce working for and with us." Basically, companies will be able to use an Nvidia platform to develop and train their own AI agents. They can train those agents not just on tasks, but also on company culture, mission, HR rules. Companies can then develop blueprints of job specific agents. Some examples that Nvidia threw out there was an AI research assistant, developers, virtual lab agents. For anyone who's ever wondered if AI will take their job one day, I am not so sure that this keto is all that reassuring.

David Meier: Let me just say, that's a very rational way to look at agents. However, what if it really could be more of an assistant than a replacement? Let's think about this for a bit. If you could program an AI agent to do repetitive tasks alongside the more value added work that you do, that would actually make you more productive. If trained correctly, it could make your work output more valuable to the company's strategic goals. Let me take my job as an investor. I actually do use AI-based tools to help me find and synthesize data and information more quickly than I could literally do by myself. I can ask the GenAI to say, "Hey. Summarize this for me or get me this piece of information." Then I can take that work that's been done more quickly than I could do it myself and combine it with my knowledge and my experience to make better investing decisions. If my company or the Motley Fool or another company wanted to invest in an agent to make one of its better workers more productive, I think that's a win win, but you have to change your mindset and that's not always easy to do in the workforce.

Mary Long: A step after agentic AI is physical AI. This is technology with an understanding of the rules of the real world, and that's where this platform called Cosmos comes in. It's an Nvidia platform that takes in text, images, and videos to generate videos of real world environments. Nvidia announced that this is going to be available open source on GitHub for developers of Autonomous hardware, robots, vehicles, etc to use these visual creations to teach hardware about the real world. Nvidia already has an Omniverse platform. Can you walk us through the difference between Cosmos and Omniverse and maybe how the two would work together?

David Meier: I feel like you're asking me to be a deity with these Omniverse Cosmos. [laughs] but that notwithstanding. Let me see what I can do real quickly here. What I'm going to do is I'm going to start from what Nvidia calls or says these two things are. It says Omniverse is a platform of APIs, SDKs, and services that enable developers to integrate rendering technologies and generative physical AI into existing software tools and simulation workflows. What the Cosmos is, is a platform of state of the art generative world foundation models. Those are used to accelerate the development of physical AI systems, such as Autonomous vehicles and robots. That's a lot of words. Let me see if I can translate that into something more digestible.

I think what it's saying is the Omniverse actually brings technologies that Nvidia has developed into software that is already built and looking to be improved upon. Let's say I have a software that creates a physical AI, I can make it better by using the Omniverse platform. Whereas the Cosmos is more like pre-built worlds that developers can start from and then make improvements based on the process or whatever it is trying to solve. That's a lot, but here's the bottom line. Either way, Nvidia wants folks using its hardware and software when advancing physical AI technologies. It is very clear that is the direction we're going in. Autonomy, whether it's robots or vehicles or whatever it is definitely the direction that our technological world is heading. Nvidia wants to be right there at the very beginning of where this trend is from when the trend is starting in order to make sure that it has a strong foundation, is brand is known, and people rely on its technologies to push that technology forward.

Mary Long: David, we've got hyper realistic gaming graphics. We've got Autonomous trucks. We've got the beginning of the cosmos. [laughs] What is your big takeaway from all of the announcements? Is there anything in particular that you are like, "Yeah, the rest is cool, but this is awesome."

David Meier: I'm literally like a kid in a candy store. [laughs] I literally loved everything. That is because of my technology background as an engineer. Frankly, I am just amazed at the foundational tools that Nvidia is or will be developing, and I seriously cannot wait to see how they impact the future, whether it's vehicles, whether it's manufacturing facilities, whether it's industrial or commercial or humanoid type robots. Literally, just open your imagination and think about what could be even if it's like science fiction that you've read in the past, that's the direction that we're going, and Nvidia is a big part of the reason we can get there.

Mary Long: If you are a kid in the candy shop, Wall Street is more looking for health food because after all of this, investors on Wall Street kind of said, "Mary, leading up to Huang's speech yesterday, Nvidia hit an all time high market cap of nearly $3.7 trillion." Post keynote, shares fell about 5-7% this morning. They're pretty unmoving from that number. What did Wall Street want from this?

David Meier: Oh my goodness. Wall Street is such a fickle beast. Look, I will say it's impossible for me to know directly, but in my experience in interfacing with Wall Street, my guess is they were looking for more information about what's happening in the near term, whether or not that was on a dollars of revenue that we expect to generate or increases incremental growth stats or something like that. But they wanted more hard numbers that they could essentially, "put into a spreadsheet" and figure out if the value of the company has changed. But, frankly, that's not what the CES is about.

CES is about cool stuff that's coming, not stuff that we already know that's here, and can it generate incremental revenue today? CES is about the future, and Nvidia did a great job of showcasing what their plans are.

Mary Long: David Meier, full-time Foolish analyst, part-time fashion consultant, part-time knower of the Cosmos and the Omniverse. Thank you so much for spending a piece of your busy schedule with us on Motley Fool Money.

David Meier: Thank you so much for having me, Mary.

Mary Long: About a year ago, new PayPal CEO Alex Chris promised to shock the world. Up next, Jason Moser joins me to check in on the payments processor. It's not so sweet honey acquisition and while going back to basics is a good bet for growing the company.

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Mary Long: Jaymo, I'll be honest with you as a consumer, I really only use PayPal to Venmo my friends after one person puts their credit card down for a dinner, and then we decide to split the bill ourselves to make it a bit easier on the waiter. That said, this is a company that's cranking out more than $5 billion in annualized free cash flow. There's more to PayPal than just Venmo. What exactly is that more, and what is PayPal doing that I can't do with Apple Pay or Zell, and how are they making that money off of those services?

Jason Moser: Well, I think that's the opportunity and also the challenge at the same time for PayPal. PayPal isn't totally unique in what it does, given how the payment space has evolved over the years. But it was a first mover, and as such, it's built up a very large network of users over time, and that really is key. That's crucial to success in this market. When you look at PayPal today, the business, there are a number of different facets to the actual business itself. There's the core payments business that ultimately is things like online payments. That's the foundation. They facilitate online transactions between buyers and sellers on e-commerce platforms, marketplaces, individual websites, and they make transaction fees from that. There's also merchant services side of the business, and that's ultimately solutions for businesses. They offer a suite of tools to help businesses of all sizes grow, things like payment processing, working capital, invoicing, subscription building, cross border payments. Again, transaction fees, interest on loans, subscription fees for premium services, things like that. There's also the Braintree side of the business that is a little bit lesser known, but it's a very important part of the overall company.

Braintree is like a global payment processing solution that caters primarily to high-growth businesses. Particular, it favors those in mobile and technology spaces. But again, they provide a comprehensive payment platform, suite of tools that these businesses can use to accept various payment methods, including credit cards, debit cards, digital wallets like Apple Pay, Google Pay, and even PayPal itself. There are some other ancillary parts to the business, things like Zoom for overseas remittance and Honey which they acquired a world bank. But those are parts of the business that have more or less fallen by the wayside over the last several years.

Mary Long: We're going to talk about that Honey acquisition and Honey side of the business because it's facing some troubles, especially more recently, but also the PayPal Growth story in a bit. Before we get there, I want to take a walk down memory lane because this is a stock in a company that's been on an interesting ride over the past couple of years.

Jason Moser: Very interesting.

Mary Long: That interesting ride involves shares peaking at over $300 a piece in mid-2021. That does not last forever. The ride goes downhill from there by fall of 2023. Stock is down off of those highs by over 80%. At that time, management brings in a new leader, guy named Alex Chris. He comes to the company after nearly two decades at into it, and now Chris has been at PayPal since September 2023. What was the situation that Chris walked into at PayPal in a little more than a year ago?

Jason Moser: Well. In regard to the stock, there was a lot of irrationality going on in the market during that time due to the pandemic. Certainly, PayPal wasn't the only one, but it definitely was the one. Alex Chris came into a situation where former CEO Dan Schulman. I think he just lost focus. I think he got a little bit ahead of his skis, so to speak, warning PayPal to ultimately be like an everything app or a super app. He made some questionable acquisitions. Again, going back to that Honey thing, he failed to capitalize on previous acquisitions like Zoom. Ultimately, Shulman was criticized by many, myself included, for not really offering a lot of metrics, not being as granular as he probably could be in what the business was doing, how we could measure its success. It was very difficult to see what was contributing, what to the bottom line for the business. I think Chris came in.

He saw this opportunity to make the case for investors and get a bit more focused on really going back to the core business of PayPal, doing what they do well, and really nailing that in getting their share of that payments pie. You look to his first Arnie Schall, he was talking about data points that would help them use AI to ultimately power a robust shopping recommendation engine, to provide more relevant rewards and savings back to their customers through card programs and whatnot, and ultimately reducing the friction in the user experience, and so, making sure to bring more metrics so that investors could actually measure the business because as I explained before, there is a lot to the business itself. I think that's made a big difference over the last year plus.

Mary Long: Chris is still pretty new to the position, but Wall Street seems to be impressed with his work thus far. Since his first day on the job, PayPal stock has risen 56%. You talk about Chris trying to return the company back to basics and what it does well, but there's more to his plan for PayPal than just that. What has he done to better position the PayPal of today than the PayPal of September 2023?

Jason Moser: I think Chris has done a very good job of executing on what he said he wanted to do. Ultimately, he wanted to get back to focusing on things like the entire transaction life cycle for the company. PayPal is a two-sided network that involves consumers and merchants and making sure to understand that entire transaction life cycle. Introducing things like express checkout and recurring payments. Improving the PayPal experience for merchants on Shopify. Shopify is a massive opportunity-comer space. Bringing prime shipping benefits to PayPal consumers. Really focusing on bringing that PayPal and Venmo branded card system to the forefront there because, as we know, rewards cards can be very powerful retention tools for users.

Mary Long: I kicked this off by talking about how I use PayPal as a consumer through Venmo. On the most recent earnings presentation, the company highlights Venmo's expansion beyond peer-to-peer payments. You talked about stepping more into the world of commerce and working with businesses. What does Venmo's role in that expansion look like? How essential is getting beyond peer-to-peer payments to Venmo and then how essential is Venmo to PayPal's growth story?

Jason Moser: Well, I think getting Venmo beyond just peer-to-peer payments is essential because to me, Venmo is an essential part of the PayPal story. I look at it as PayPal 2.0. What I mean by that is if you think about this next generation of consumers, these younger users, they're very plugged into Venmo. That is a verb for a lot of younger consumers who may not really be familiar with PayPal itself. They may have never even used PayPal, but they certainly use Venmo. Really, being able to take Venmo and do with it what they've been able to do with the PayPal brand over the years, I think is something that is absolutely essential. The good news is, it really does seem like that is a priority for Mr. Chris, and it does seem like he's executing on that front, as well.

Mary Long: PayPal and Venmo together have 200 million monthly active users. The number of transactions per account has climbed about 9% year over year. Active accounts, meanwhile, has grown only 1% in the most recent quarter. You talked about PayPal trying to reach younger consumers. They're doing a good job at getting their existing users to use PayPal more, but how exactly does the company go out and expand the base that it already has?

Jason Moser: Well, I think part of that is in the partnerships that they've created with entities. They're like Shopify, you got Adian, I think FiServe as well. Continuing to find ways to introduce themselves into that value proposition, into that value chain. Visa and Mastercard, another good example there. But ultimately, demonstrating that value proposition for both consumers and merchants, again, we talked about how powerful that two-sided network is. You can't just focus on one. You really have to focus on both. That's one of the exciting parts of PayPal's future is that two-sided network. If they can do that and continue to foster these relationships and partnerships and introduce themselves in new ways into that value chain, I think the future is still very exciting for the company.

Mary Long: At the top of our conversation, you mentioned Honey, and that is a browser extension that PayPal bought for about $4 billion in 2020. More recently, that browser extension and PayPal by extension, have been in the news because Honey has been accused of being a scam and of stealing money from the very influencers who are paid to promote the product. It was just sued, I think the day or two days before recording this by a YouTuber or LegalEagle. How serious a problem is this whole Honey debacle for PayPal?

Jason Moser: Well, I will say this first and foremost. I look at this. I think Honey was a bad acquisition. I remember when they announced it. I wasn't really familiar with Honey as a consumer. I went in there and fiddled around with it and thought. You know what? This just isn't really very user-friendly. It just wasn't really something I saw $4 billion worth of value in. Now, the upside is that was mostly cash deal. It's something that we will see likely just the value of this deal written off over time. It was something that former leadership did. It's not fatal, by any means, that's the good news. But I think it's a good example of former leadership losing sight of where they should have really been focused.

Mary Long: When we talk about competition in this space, Apple Pay and Zell immediately come to my mind. There's also Block. There's Adien, there's Shift4. You mentioned Visa and Mastercard, and those really stick out to me because I feel as though they're off and left out of the competition conversation when we're thinking about PayPal. But if I'm using PayPal, I'm not using my credit card. Where do the credit card companies actually fit in to this equation?

Jason Moser: It's a personal experience, for sure. I'll say whenever I use PayPal or Venmo, I'm using one card or another. It depends on how you fund the transaction. Either you're funding it through your actual PayPal account or your Venmo account, or it's something that's linked to a bank debit card or a credit card. A good example. I run most of my subscription services through my PayPal, which are all paid for with my Prime visa. The idea there is that when that card is set to expire, I only have to update it once through my PayPal account instead of having to go update it via every service. That's a little bit of a hack there for those interested. When I send my daughter's money through Venmo that's linked to our Bank of America Visa debit card, again, it's showing the creative ways that PayPal and Venmo are able to work into that value chain. They can see Visa and Mastercard, certainly as competitors, but also as partners.

Mary Long: What returns do you expect PayPal to generate over the next 5-10 years? We talked a lot about the growth story, what Alex Chris has already set up the company to do, what his plans are for the future. In terms of numbers, how do you expect that to play out?

Jason Moser: I look at it over the next five years. I don't think it's outlandish to expect 15% annualize. It's basically looking at a double in five years. I think they can do this through a combination of the efforts that Chris is undertaking. They'll continue to grow that top line while reducing the expenses of the business in improving profitability. Then you mentioned at the top of the show the cash flow, and that's really important because they continue to repurchase shares, and those repurchases are, in fact, bringing the share account down. That is something that they will continue to do, and as we know, is that share count comes down in theory, is supposed to make those remaining shares just a little bit more valuable because there are fewer of them. I don't think 15% annualized for the next five years is outlandish at all.

Mary Long: As always, people on the program may have interest in the stocks they talked about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. The Motley Fool only picks products that it would personally recommend to friends like you. I'm Mary Long. Thanks for listening Fools. We're off tomorrow to honor former president Jimmy Carter. We'll be back on Friday. See you then.

Bank of America is an advertising partner of Motley Fool Money. David Meier has no position in any of the stocks mentioned. Jason Moser has positions in Apple, Block, Mastercard, PayPal, Shopify, and Visa. Mary Long has positions in Shopify. Ricky Mulvey has positions in Adyen, PayPal, and Shopify. The Motley Fool has positions in and recommends Adyen, Apple, Bank of America, Block, Intuit, Mastercard, Nvidia, PayPal, Shift4 Payments, Shopify, Tesla, and Visa. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard, long January 2027 $42.50 calls on PayPal, short January 2025 $380 calls on Mastercard, and short March 2025 $85 calls on PayPal. The Motley Fool has a disclosure policy.