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I think you mix a bit index fund and hedge funds. I completely agree that it is possible to beat the market - it's just that it's very difficult, mostly due to

I think you mix a bit index fund and hedge funds. I completely agree that it is possible to beat the market - it's just that it's very difficult, mostly due to misaligned time horizons. Take your insight here about NVidia - it's false. So far, GPUs sales DID NOT increase, at least not significantly. Go check NVidia sales for past 4 quarters. They said they expect them to increase significantly in the next quarter. Even if it does, and even if it doubles what they say, the valuation of the company is still in the bubble territory. Another great example is Tesla - stock surged on anouncement that GM will use their chargers. When you look at the numbers, they will make an insignificant money on that (optimistic scenarios are between 3-10 billion $, by 2030 !) - yet the stock added more capitalization than ... the entire captialization of GM ! Now, if you say that NVidia has a huge business moat that is untouchable for the next 5 years - that's a different story.

AnthonyMouse 3y ago
> Take your insight here about NVidia - it's false. That seems inconsistent with: > They said they expect them to increase significantly in the next quarter. The beating the market thing is the thing where you figure it out before other people and buy before the price goes up. Or figure out what people will think will be the case in the future. Even if their sales don't go up at all, because large numbers of people now expect them to, someone who came to that conclusion earlier and bought the stock last year will have beat the market between then and now. > Even if it does, and even if it doubles what they say, the valuation of the company is still in the bubble territory. Tech valuations always include the potential for growth. When you make a lot of money and have a hot product to leverage into dominance in other market segments, you have more growth potential. Microsoft now makes more revenue from Azure than Windows. But the reason for that is Windows. They can give you a VM with Windows without paying anyone else for a license, which is a competitive advantage that gets them a huge chunk of a market which is bigger than Windows itself. That is never guaranteed, but the potential for it increases valuations. Then sometimes they crash. But sometimes they go up more, because the potential actually pans out. > Another great example is Tesla - stock surged on anouncement that GM will use their chargers. When you look at the numbers, they will make an insignificant money on that (optimistic scenarios are between 3-10 billion $, by 2030 !) Because it's not about making money on chargers. If more companies use their charging standards, more places will install their chargers because there will be more customers with cars that can use them. With more chargers, more people will find it viable to buy an electric car. Then they sell more cars. And it's the same kind of thing. The valuation includes the potential for growth. Now Tesla is selling a lot of cars, which they're making batteries for, so they're gaining expertise in making cost-effective batteries. If the batteries get cheap enough, they won't just be selling them in cars, it will make Powerwalls and grid storage cost-effective, and that's a big potential market. There is no guarantee this happens, but the potential for it increases their valuation.
- TheAlchemist 3y ago
  Again, the numbers don't add up. It's an illusion - you can project this kind of growth for small companies, not for huge companies. Maybe if aliens come down to earth to buy some GPUs next year. Same for Tesla - for those projections to be true, they would need to be making more cars than any other car maker, and soon. It's not even close to happening. I'm not saying that to diminish their achievements - which are truly unbelievable ! But their valuation reflects almost impossible things. Fun fact for Tesla - Tesla is mostly buying batteries for their cars from other battery makers, not making them ! Tesla is very deceptive about what they do, and what they don't. Knowing that they are a just buying batteries and not making them, change your opinion about batteries making profit potential for Tesla ?
  - AnthonyMouse 3y ago
    > It's an illusion - you can project this kind of growth for small companies, not for huge companies Google's revenue is at more than 500% of what it was a decade ago. Amazon 800%. > Knowing that they are a just buying batteries and not making them, change your opinion about batteries making profit potential for Tesla ? It's their purchasing capacity that matters because it's what justifies the amount it makes sense for them to spend on R&D (and provides the revenue they have to do it with). The factories that produce more cost-effective future batteries can't have been built yet anyway if the technology is still under development.
    - TheAlchemist 3y ago
      I'm sorry but how this second answer relates to my question ? You said that selling a lot of cars is good since they gain experience in making cost-effective batteries, and hence can sell other profitable things - not only cars. I just pointed to you that it's not Tesla which is doing it - it's other companies ! Yet, somehow, you seem to ignore that little detail :)

AnthonyMouse 3y ago

> Take your insight here about NVidia - it's false. That seems inconsistent with: > They said they expect them to increase significantly in the next quarter. The beating the market thing is the thing where you figure it out before other people and buy before the price goes up. Or figure out what people will think will be the case in the future. Even if their sales don't go up at all, because large numbers of people now expect them to, someone who came to that conclusion earlier and bought the stock last year will have beat the market between then and now. > Even if it does, and even if it doubles what they say, the valuation of the company is still in the bubble territory. Tech valuations always include the potential for growth. When you make a lot of money and have a hot product to leverage into dominance in other market segments, you have more growth potential. Microsoft now makes more revenue from Azure than Windows. But the reason for that is Windows. They can give you a VM with Windows without paying anyone else for a license, which is a competitive advantage that gets them a huge chunk of a market which is bigger than Windows itself. That is never guaranteed, but the potential for it increases valuations. Then sometimes they crash. But sometimes they go up more, because the potential actually pans out. > Another great example is Tesla - stock surged on anouncement that GM will use their chargers. When you look at the numbers, they will make an insignificant money on that (optimistic scenarios are between 3-10 billion $, by 2030 !) Because it's not about making money on chargers. If more companies use their charging standards, more places will install their chargers because there will be more customers with cars that can use them. With more chargers, more people will find it viable to buy an electric car. Then they sell more cars. And it's the same kind of thing. The valuation includes the potential for growth. Now Tesla is selling a lot of cars, which they're making batteries for, so they're gaining expertise in making cost-effective batteries. If the batteries get cheap enough, they won't just be selling them in cars, it will make Powerwalls and grid storage cost-effective, and that's a big potential market. There is no guarantee this happens, but the potential for it increases their valuation.

TheAlchemist 3y ago
Again, the numbers don't add up. It's an illusion - you can project this kind of growth for small companies, not for huge companies. Maybe if aliens come down to earth to buy some GPUs next year. Same for Tesla - for those projections to be true, they would need to be making more cars than any other car maker, and soon. It's not even close to happening. I'm not saying that to diminish their achievements - which are truly unbelievable ! But their valuation reflects almost impossible things. Fun fact for Tesla - Tesla is mostly buying batteries for their cars from other battery makers, not making them ! Tesla is very deceptive about what they do, and what they don't. Knowing that they are a just buying batteries and not making them, change your opinion about batteries making profit potential for Tesla ?
- AnthonyMouse 3y ago
  > It's an illusion - you can project this kind of growth for small companies, not for huge companies Google's revenue is at more than 500% of what it was a decade ago. Amazon 800%. > Knowing that they are a just buying batteries and not making them, change your opinion about batteries making profit potential for Tesla ? It's their purchasing capacity that matters because it's what justifies the amount it makes sense for them to spend on R&D (and provides the revenue they have to do it with). The factories that produce more cost-effective future batteries can't have been built yet anyway if the technology is still under development.
  - TheAlchemist 3y ago
    I'm sorry but how this second answer relates to my question ? You said that selling a lot of cars is good since they gain experience in making cost-effective batteries, and hence can sell other profitable things - not only cars. I just pointed to you that it's not Tesla which is doing it - it's other companies ! Yet, somehow, you seem to ignore that little detail :)