Cirrus Networks (ASX: CNW) (FRA: LG4) shares are up 15% on the day. CNW shares are also suspended awaiting further clarification of the deal with Nvidia (NASDAQ: NVDA). One minor issue here is that the suspension definitely affects the ASX listing but it's unclear as to whether it affects the Frankfurt one. It might be worth checking - if a speculation is desired - on whether LG4 stock is still tradeable.
The specific is that Nvidia has signed up with Cirrus: “Leading IT solutions provider Cirrus Networks Holdings Limited (“Cirrus” or the “Company”) (ASX: CNW) has today announced a collaboration with NVIDIA to leverage the power of accelerated computing and artificial intelligence (AI) to drive innovation, improve efficiency, and promote sustainability across the Australian resources sector.“
There are three things to say about this. The first is that yes, the natural resources sector is a place where AI could have very interesting uses. Long gone are the days when a hammer and a shovel found interesting minerals on the surface. It's all underground modelling these days. Vast consumption of computer resources. But it's also still something of an art, not a science - that's why everyone has to dig a hole to check the assumptions being made about mineral positioning. This absolutely is one of those areas where AI would be - will be - very useful indeed. We'd expect to find more useful deposits of minerals as a result.
Cirrus Networks Holdings share price from ASX
The second interest is that it gives us some insight into Nvidia's strategic plan. As with the tie up with Recursion Pharma also just announced. Nvidia isnm't just going to try selling the GPU chips that will power AI. They're building out a series of partnerships into the industries that might well benefit from AI - pharma research, mineral deposit modelling - and trying to make sure that they capture some of that value add.
Just as background, the usual thinking is that the manufacturers of a new tech manage to capture perhaps 3% of the value add. It's the users of the new tech who manage to capture most of the value created - therefore a value maximising strategy is to try to vertically integrate.
The third interest is that, well, if that's Nvidia's strategy then who else are they going to tie up with? With two deals announced just in the past 24 hours there's going to be excessive speculation about who is next. Getting it right would be profitable too. So, let the guessing begin!
Cirrus will benefit from this but we need the suspension to end before we see by how much. Unless that Frankfurt quote is still trading, obviously.
