AI hype

I think you're right because yes they make the hardware behind the products, but they're not making the products, which is where you'd think the actual money should be.

On the other hand, it will be interesting to see how much money there is in "intelligence" the more abundant it becomes.

Who is competing with Nvidia right now? if nobody is then they can basically dictate their own price with the kind of demand there is right now for GPUs.

There is not that much product to be made just like there wasn’t that much gold to be mined

This is dot-com rush all over again, but it's worth keeping in mind the dot-com rush (with some poetic license) gave us Google, Amazon, Meta, and much of the value of modern Apple+Microsoft.

Those are five of the top ten companies in the world by market cap.

Not many more dot-coms on the list of top 100 though:

https://companiesmarketcap.com/

It was a winner-takes-all market with a few big winners and a lot of losers.

There's a lot of product to be made. AI is already transforming a lot of businesses. It's too early to tell who the big winners will be, how the market will be structured, or what will happen.

I suspect, in the metaphor, NVidia is the Cisco or the Sun Microsystems. They power the gold rush. Cisco is #60 on biggest companies, and Sun died 14 years ago. I suspect NVidia is now overvalued, but I suspect it should still be highly-valued.

I suspect things will self-correct if AMD, Intel, or one of the startups gets software in shape. The problem is that as much as NVidia can maintain competitive advantage, competition is likely to cap profit margin. If Intel is 30% less efficient than NVidia in compute-per-dollar, than NVidia's profit margin can be at most 30% more than Intel.

The way I see it right now, the situation with NVIDIA and AI companies is like shovel sellers and gold miners. Picking which gold miner is going to strike gold and which ones will go bust is difficult to tell, but knowing that all of them will need shovels/mining equipment means that shovel sellers are a safe but extremely rewarding bet for the next little while.

Something Something Dot Com Crash 2.0

maturity of the CUDA environment, continued good engineering and execution, a world-class organization (probably the best hardware team in the world) with a business savant at the helm and a founder-mindset and a truly agile and flat team structure, etc

what's the price for apple after introducing the iphone? visionary leader in charge of a company that just delivered a money-faucet technology that - while yes, competition will emerge - they will still inevitably end up owning a large and highly desirable stake of in the market?

cuda is literally 15 years ago, and people are just realizing they have to actually start by catching up to that. The "NVIDIA is an AI company now" was like 2015, "mid-2010s", it was a realization jensen had during alexnet's rise, in the early/mid 2010s. It truly will take a long time to build that kind of ecosystem, Apple's support is great with Metal and it still is fairly well a potemkin village until there's more traction on apple gpu support. And a lot of competitors don't even have that, AMD is only finally just realizing this and Intel is also spending like crazy to build out OneAPI/SyCL.

Best time to plant the tree is 15 years ago, and Jensen has repeatedly planted trees where they needed them to be successful in the long term, and moved the engineering and business sides to make it happen.

Programmable shaders, CUDA, tessellation, GSync, and tensor/ML (and RT at the same time) have all been big big bets, and many people criticized some of them real harshly at the time, or backseat-drove that NVIDIA should have given it away, etc.

https://youtu.be/Xn1EsFe7snQ?t=1086

https://youtu.be/tu7pxJXBBn8?t=273

Also, just in general there's really only a handful of companies that can build something like H100/H200 or MI300X or Ponte Vecchio and get an actual competitive product out of it. Let alone the rest of the integration in the system (multi-node, networking, etc) which is all increasingly necessary to build HPC systems at scale etc. NVIDIA paid for mellanox, and amd paid for xilinx, etc. "just" integrate all that successfully into something that clients can start building products on, when can you deliver a from-scratch competitor? lol

(shoutout to oxide though, that actually does look pretty sick, bryan cantrill is in charge so you know it's gonna be good)

There's definitely an enormous amount of key-man risk, but it's also certainly the best cross-disciplinary team (hardware, software, business) in the business today. Nobody else can identify what's gonna be big, lay the groundwork, execute successfully, and roll with the punches (and manage inventory) 90s-tech-business style.

What if you could invest in cray, but it was a business where cray had repeatedly executed successfully and managed to pioneer several large commercial applications for their systems, and expected to continue pivoting and innovating into new areas going forward? There is nobody else in the business like Jensen right now, he is a savant.

Not to mention he's also very humble. Admitting that he would not build Nvidia again was hard to say I imagine.

Future demand for compute could be beyond our current ability to imagine.

that earnings remain same as this quarter for a few quarters (higher revenues, lower margins ofc). forward P/E is 30-40 range, typical for tech companies.

Apple has been making a bank on iPhones, with no major leap frog in 10 years. Nvidia could do that too, hard but not unimaginable.

Over the last year they've seen a 3x jump in gross profit up to 44b on 16b cost of revenue with no signs of going the other way any time soon. That's where I'm guessing the price is coming from

Haven't you heard? AI will replace all of us in our jobs by like 2027

Just like teslas became fully autonomous in 2014 and replaced all human drivers as saint Elon Musk prophecised