What’s Altucher’s “NVIDIA Backdoor” Company for the “X-Chip” — Big News Coming on March 21?

by Travis Johnson, Stock Gumshoe | March 18, 2024 1:17 pm

Altucher says, "The most disruptive tech announcement of our lifetime has been scheduled for Wednesday, March 21" -- who will NVIDIA be mentioning in their big announcement? We dig into the tease... and we've at least got a guess for you...

Pitchmen love to find the hottest product, and then say they’ve used their uncanny skill and their unparalleled industry connections to find the secret little company who will benefit from that hot product. They’ve been doing it for years with Apple, fueled by the cottage industry of “whisperers” inside Chinese manufacturing plants who start the rumors flying, and by the folks who always buy the latest Apple device on the first day and then tear it apart to try to identify the semiconductors[1] and other parts they used.

Sometimes it works a little bit, for a little while… but more often, in my experience, it’s the investing version of a conspiracy theory — employee X worked for this company before and has a new company, now, so he’ll have the inside track as the supplier for the next hot product. From Luke Lango[2]’s breathless spiel about how certain he was that his favorite LiDAR stock would get the contract for the Apple Car, to Ray Blanco[3]’s pitches over the years about his expectation that Elon Musk[4] would ID his little battery[5] supplier at Tesla’s next Battery Day, to James Altucher[6]’s pitch, just a few weeks ago, about the tiny company that was bound to be the supplier for Apple Vision Pro headset. Sometimes the stock went up a bit, largely driven by the attention stirred up by these manic pundits, but it is extremely rare for it to really work out.

Novonix is now back down below where it was when Ray Blanco poiunded the table for that one in 2020 and 2021 as the next Tesla partner[7] (and in a two-fer, his other favorite play at the time, Fisker (FSR) as a “next Tesla” car company, is probably on the brink of declaring bankruptcy). Luke Lango’s “i-Car supplier” Aeva[8] (AEVA) is down 80%, thrown on the same trash heap as all the other LiDAR hopefuls that went public through SPAC mergers in 2021, and Kopin’s (KOPN) earnings call last week threw cold water[9] on Altucher’s promise that they would supply critical components for the Apple Vision Pro[10].

Those are just a few examples of the “overpromise” tendencies of pundits who are promoting the “secret” supplier for the “next big thing.” We could have named a dozen others, but you get the idea. And coincidentally, perhaps, these highfalutin’ promises tend to be used to sell “upgrade” newsletters — the $2,500 or $5,000 subscriptions that make investors believe they really are the keys to the kingdom, and which are, interestingly enough, almost aways nonrefundable commitments.

So what’s the latest pig in a poke being promoted? It’s from James Altucher again, and it’s all about NVIDIA… which, of course, is the hottest stock with the hottest story in the market, as NVIDIA chips are flying out the door at premium prices to power everyone’s favorite new AI experiments. And NVIDIA is hosting its developers conference this week, GTC, so we can be quite sure that NVIDIA will be in the news, and a lot of partnerships and breakthroughs will be talked about. NVIDIA CEO Jensen Huang’s Keynote address will start at 4pm today, but the conference goes through Thursday.

OK, fine, we shouldn’t call it a “pig in a poke” until we’ve actually listened to the whole presentation and tried to ID the stock for you… but color me skeptical going in. That’s how we do things here at Stock Gumshoe — even if these hot stories sometimes to ignite for a little while, either because a pundit is screaming about the stock or because of some news that sounds exciting in the heat of the moment, it’s way to easy to be parted from your money before you really have a chance to think. Some “gotta hurry!” enthusiasm and a hot story can easily combined to wreck a retirement[11] fund.

So that’s the caution I always start with, but I’m certainly curious about the stock… so let’s look at what the investment actually might be, what the odds of success are, and whether we should be expecting a big “win” on March 21. Ready?

Here’s the spiel from the order form:

“Join Paradigm Mastermind Group Before Nvidia’s March 21st Announcement

“James Altucher will teach you how to immediately act on this A.I. opportunity – that’s poised to surge 10,000% by 2025…

“The AI Wealth Window is about to transform into an Accelerated Wealth Window.

“And this could be a life-changing financial event for those who act immediately.

“Because a tiny $1 billion AI firm is standing at the center of this all.

“And with their Nvidia partnership…

“This small stock could see its revenue surge to $50 billion or $100 billion by 2025

“I believe that kind of growth would mean up to 10,000% returns.

“And the biggest rise could take place immediately following March 21st – when the X chip is publicly unveiled.”

As with Altucher’s overheated pitch about the Apple Vision Pro a couple months ago, this is a sales pitch for the Paradigm Mastermind Group, which is essentially just a combo newsletter from Altucher and his Paradigm Press[12] colleagues Ray Blanco and Jim Rickards[13]. They’re charging $2,495/yr., with what they call a 100% satisfaction guarantee… which doesn’t mean you get your money back, this is completely non-refundable, but it means you get a “credit” that you can use to buy the other Paradigm Press newsletters. So yes, to be clear, it doesn’t much matter whether or not this stock pick is successful, they have your $2,495, and you’re not getting it back.

What other clues lurk in the presentation?

NVIDIA’s GTC Conference is clearly the “exciting AI event in Silicon Valley” that will feature a “truly world-altering AI announcement. The most disruptive tech announcement of our lifetimes.”

And Altucher says that “This is going to unfold rapidly on the morning of March 21, immediately propelling this AI story to the headlines. This will lead to Wall Street investing hundreds of billions of dollars in the next breakthroughs.”

That big news is from NVIDIA itself, of course, and Altucher says that the big announcement will be the release of their latest AI technology — he calls it the “X Chip.”

[14]

So that’s a reference to the B100, which is NVIDIA’s latest AI chipset, using their Blackwell architecture (following the Hopper architecture in the current H100 and upcoming H200 chipsets), and yes, investors are widely expecting the B100 to be a huge hit — and it will probably be announced in more detail during this conference, either at the keynote today or in some future session of the conference (I would assume today, since Jensen Huang will probably want to be the one talking it up). Altucher persists in predicting that they key announcement will come on March 21, which is the last day of the conference…

“On March 21, when these chips are announced, Nvidia will include another critical announcement… they will detail the company they have partnered with to unleash the full potential of what these chips will do for the AI industry…

“this AI company has already inked massive contracts with NVIDIA and will be deeply ingrained in this X-chip project…

“1,700X smaller than NVIDIA, but about to be at the epicenter of what stands to be the largest scale technological rollout of all time.”

Subtle stuff, right? With NVIDIA at a market cap of about $2.2 trillion, “1,700x smaller” would be, if we can ignore the nonsensical nature of that phrase, something between $1-2 billion. So yes, certainly a small company, and he refers to it as a “billion-dollar company” a couple times later on — though if he was making that judgement call a couple months ago, it could have been even smaller, so we should keep an open mind on that (if he did that math in early January, the market cap of this little company would have had to be about $700 million to be “1,700X smaller than NVIDIA”).

What else does he say about this “March 21” announcement?

“I believe NVIDIA executives are going to mention this company explicitly within this announcement…”

“The company’s name and maybe even the stock ticker will be included in NVIDIA’s press release… when this happens, this virtually unknown company could go haywire.”

And Altucher’s colleague Doug Hill[15] calls it a “tiny contractor who will be explicitly involved in this massive A.I. infrastructure project.”

Some more non-specific verbiage…

“This tiny AI company who is going to be pivotal to this X-chip is going to be one of the most explosive of them all, because they are on the inside, working directly with the King of AI, NVIDIA. On March 21 the entire world is going to see that.”

And some of the dangerous FOMO hype that often attracts people, even if they don’t want to admit it…

“Whether you’re behind on your retirement, or you’ve missed out on every major tech explosion in the last 20 years, or maybe you just want to know what it feels like to make that one, life-changing investment that financial secures your family with a 100X windfall in the coming years. This NVIDIA catalyst will mark your best and probably last chance to take full advantage of this AI wealth window.”

Anything can happen, of course, and people are gaga for AI these days — heck, rumors started circulating that Apple is going to license Alphabet’s Gemini AI system for the iPhone, and that was enough to boost Alphabet’s market cap by $100 billion in pre-market trading this morning. It’s all about stories and trends and headlines, and that means it can go bonkers without any fundamental basis, and therefore it means the investment enthusiasm for a particular idea can also evaporate overnight when the next story comes out.

So what little company is he talking about?

Here’s how Altucher describes the stock in the ad — again, not many real clues:

“This technology needs to be custom-tailored for the client and then maintained and managed by a company that specializes in this type of A.I. infrastructure

“NVIDIA focuses on the manufacturing and development of AI, so they’ve opted to outsource this process to the company I’m telling you about

“High-performace computing firm that focuses on setting up enterprise AI systems… when somebody buys the X-chips, this other company is going to do all the heavy lifting.

“NVIDIA makes these chips, this tiny company installs them. NVIDIA needs them to roll these chips out.”

So although one of the emails introducing this ad “presentation” calls it a “tiny chip company,” that seems to not actually be true. It’s some sort of distributor or technology consulting/hardware company, maybe a specialized service provider for these kinds of AI projects or just a reseller, it’s hard to say for sure.

There are literally hundreds of NVIDIA partners, from global system integrators to distributors to suppliers, with locations around the world… the list that NVIDIA makes public actually numbers over 1,000 partners, and includes most of the world’s large technology contractors and consulting firms, as well as lots of smaller companies.

Many of these are private companies who are well-established in the IT consulting, hardware and distribution businesses, like SoftServe, WWT, and Lambda, or specialized distribution companies that “own” a particular country or region.

The ones who might reasonably fit the limited clues we’ve received are ePlus (PLUS)[16], SMART Global (SGH), mostly thanks to its Penguin business, PC Connection (CNXN), Perficient (PRFT), and maybe even GDS Holdings (GDS) if you want to stretch to China[17]… none of those had a particularly explosive move this morning, befitting a big teaser promise. Indeed, as far as I can tell, no other stock in the $1 billion range that could conceivably match Altucher’s clues made a big move this morning… so we might conclude that perhaps not enough folks signed up for the $2,500 deal to really move the needle. And, of course, the clues dropped were not specific enough for lots of folks to have a definitive “bet on it” answer to the tease over the weekend, including yours truly.

So who might it be?

The only other clue we get is…

“… insiders at NVIDIA have declared this is one of the most important partnerships that NVIDIA has… this tiny A.I. contractor is already working with the Department of Defense[18], Tesla, Meta, and even the Department of Energy… but the X-chip will likely make them one of the busiest and most explosive companies throughout the A.I. sector.”

“This behind-the-scenes company is valued at just $1 billion, incredibly small… massive opportunity to scale”

So we’ll just have to throw a guess out there — from what I can tell, only one of those companies has been publicly connected to the Departments of Energy and Defense, and has worked with both Tesla and Meta Platforms in some specific way that made it into a press release… and it is still right around a billion dollars in market cap, and is a preferred partner for NVIDIA (in fact, in a recent year they got two “partner of the year” awards in different areas). That’s SMART Global Holdings (SGH).

This is not a big company, but it does have some programs that specifically put NVIDIA hardware to use to help people build AI projects, including essentially building servers which use NVIDIA chips as well as offering consulting and platform solutions in high performance computing in general. They have a market cap of about a billion dollars, and also sales of about a billion dollars a year of late.

They don’t stand out in any particularly way when you look at their numbers, revenue has been roughly flat over the past five years, earnings were flat until they fall late last year, and the few analysts who follow the stock think they’ll have adjusted earnings of about $1.17 per share this year and $2.10 next year. I’m not settling on this as my guess because I love the idea, just because I think it’s the best match for the very limited clues we received.

If there’s going to be an exciting surge of business for Smart Global, it will probably be within their Penguin Solutions business, which they say “designs, builds, deploys, and manages AI and accelerated computing infrastructures at scale” and has “deployed over 50,000 GPUs in partnership with leaders in AI.”

It’s an interesting little conglomerate that has been involved in several different parts of the semiconductor industry over the past 25 years or so, and has been bought and sold a few times, including a couple IPOs along the way. They had been primarily in the memory chip business, including owning some manufacturing capacity in Brazil[19] (which they have now mostly sold), but have shifted focus over the past five years, starting when they acquired Penguin Computing. They later also acquired the LED[20] business from Cree, so they still have a bunch of different businesses, but they want to lean more on services revenue, and most of that is in their “intelligent platformm solutions” group, including Penguin. There’s a good presentation about that Penguin business here, from last October[21].

Excitement to come? I don’t know. I’d be shocked if Penguin or Smart Global was mentioned when Jensen Huang officially unveils the B100 this week, whether that’s today or later in the week, but I guess one never knows… and the CEO of Smart Global is one of the many folks participating in a panel session[22] at NVIDIA’s GTC Conference, and they do, of course, have a booth in the exhibit hall.

Why might it not be Smart Global? Well, lots of reasons… we can’t really claim any certainty in this match, but some of what Altucher implies doesn’t necessarily fit, like…

“They’ve inked a massive deal with NVIDIA to be the AI giant’s middleman”

They do sort of work as a middleman, I guess, and they manage tens of thousands of GPUs, but I don’t know that they have particularly “inked a massive deal” that stands out among NVIDIA’s many, many distributors and system integrators. They’re not likely to buy nearly as many GPUs as Dell[23] or HP or the other big server makers, and they won’t be first in line to buy them like Microsoft and Amazon and Alphabet might be, but sure, I guess they’re one of many middlemen that are helping mostly smaller companies build AI hardware capacity using NVIDIA products.

So nothing definitive for you today, dear friends, but one interesting little company to research while you want for Jensen Huang’s keynote, should you be so inclined. Have a great day!

Disclosure: Of the companies mentioned above, I own shares of Alphabet, Amazon and NVIDIA. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.

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