9 ms·

Downside at NVIDIA (and the Nasdaq at large)

56 points by philoinvestor 3y ago

philoinvestor 3y ago
Valuations won't keep up with the future, it seems.
- rvz 3y ago
  Something tells me that lots of people are about to get trapped in the market believing that the AI narrative will make it keep going up forever. It would take a very nasty surprise in the market that will put all of that at risk. I guess the euphoric sentiment in AI is a signal to safely take your money out right now before the stock market gets upset with several companies showing signs of growing geo-political / legal risks and especially extreme over-valuation. Given that a single company is carrying the stock market, it can take one bad event to cascade onto everyone else by surprise.
  - jansan 3y ago
    Also, everbody is invested in the same stocks. With ETF this has accelerated and I decided to find some stocks that are underrepresented in ETFs for various reasons and still have a solid, old-fashioned business model.
    - sgu999 3y ago
      Mind sharing a few?
      - deleted 3y ago
        [deleted]
bugbuddy 3y ago
I am at max leverage and all in so I need this rally to keep going.
- deviantbit 3y ago
  Hold until December or January. Expect volatility over the summer. There is probably about 15-20% left to go. They're expecting more than $20 billion in chip sales alone this quarter. Expect rhetoric out of both political parties over regulation, which will cause additional volatility. Expect a deal between Nvidia and Apple. Apple is behind the curve. Both companies want to control ARM.
  - pinkmuffinere 3y ago
    You’re making some very bold predictions. It makes me uncomfortable to see such specific claims, backed up with no data, so soon after the bubble with crypto. You’re either a prophet or overconfident.
    - deviantbit 3y ago
      ycombinator makes it difficult to provide a detailed analysis. But I would recommend you look to history of other melt-ups, and compare. The one notable difference with Nvidia is they actually have a product and revenue. To verify the $20 billion in revenue, go look at their own guidance.
  - smoldesu 3y ago
    > Expect a deal between Nvidia and Apple. I'm sooner expecting hell to freeze over. Apple would be rewriting their own history with that kind of deal.
    - deviantbit 3y ago
      I guess you haven't heard. Apple is already under contract with Nvidia for the H200 and B100. I guess hell froze over. Apple will not be able to participate in the AI space w/ out Nvidia. Nvidia dropped CUDA support for MacOS, but Apple is going to have to get it back. Wait for the deal that is coming.
aurareturn 3y ago
Which means Microsoft (9% of the Nasdaq 100), is using its cash and services to power an AI company which touched $1.6billion in ARR for 2023 but is raising money at a $100 billion valuation.. (raising money at >50X non-profitable sales) I don't think $100b for OpenAI is that farfetched. You have way less transformative companies being valued north of $100b. After playing with ChatGPT (using GPT4) and GPT4 API, I'm quite convinced that only 2 things are stopping LLMs from being ubiquitous right now and one of them is simply inference cost. The other is GPT4 being having many intentional guardrails. That's not to mention GPT5 and 6 and so on coming out. You can argue that OpenAI might not hold the lead. That's fine. But the author also argued against Nvidia. Nvidia doesn't care if OpenAI loses the lead because the next LLM lab also uses Nvidia. Note: I'm also invested in the market. Here's my investing strategy at the moment: https://news.ycombinator.com/item?id=39342028#39342362 https://news.ycombinator.com/item?id=39342028#39342362 I'm not a stock picking expert. But I'm investing like I'm going to lose my job as a software dev. If I lose my job, my stocks will surely pay for my food. If I don't lose my job, then it will continue to pay for my food. It's a hedge for myself.
- boxed 3y ago
  > You have way less transformative companies being valued north of $100b. Transformative maybe, but valuation shouldn't be about transformative, it should be about profitable. This is a lot more doubtful.
  - aurareturn 3y ago
    >Transformative maybe, but valuation shouldn't be about transformative, it should be about profitable. My assumption is that LLMs would be ubiquitous right now, just GPT4, not even GPT5, if inference cost is low enough. Therefore, I expect the market for LLMs to expand exponentially in the future once inference cost is solved.
    - ChatGTP 3y ago
      exponentially
    - 3y ago
eganist 3y ago
> The Nasdaq is in an A.I.-led bubble This^^ title is editorialized and possibly deliberately misleading. Article ends with: > I will start working on a piece that will assess whether the NASDAQ (primarily) and hence passive investing as a whole is in a tech and AI-infused reflexive bubble.
- philoinvestor 3y ago
  The piece is now finished and about to be published in the next couple of days.. So the title is not deliberately misleading. If from what you have read and see in markets, you don't believe that the Naz is in an A.I.-led bubble, then ok.
rapsey 3y ago
Listening to finance and VC podcasts it seems to me quite clear there is a bubble brewing. They are all repeating the same mantras and convincing themselves of a new gold rush. The financial side is convinced developers are 10x as productive with copilot and AI tools. They are and will increasingly be forcing CTOs to get on the copilot bandwagon or risk getting fired. The tech companies are not likely to get fooled, but your average non-tech S&P 500 company is going to be giving MS a fortune. AI companies are getting funded with hundreds of millions/billions with no realistic path to making money (mistral, anthropic, huggingface). The only one making money is nVidia and MS. nVidia, MS and others are frankly committing clear fraud with round tripping money and making a killing. When there is billions being spent on ventures with no business model we are repeating the dotcom bubble. I bet it is going to last a while yet though so plenty of money to be made before the inevitable.
- MattGaiser 3y ago
  > The financial side is convinced developers are 10x as productive with copilot and AI tools. The opportunity is bigger. It isn't 10x existing developers, but making everyone 3-5x as productive by turning everyone into someone able to automate a basic system. AI could tackle pretty much every knowledge job in the lowest tier of a job pyramid.
- IshKebab 3y ago
  I don't think copilot makes you 10x more productive. Anyone who has used it can tell you that's nonsense. 30% more productive is way more realistic, but even 30% is clearly worth it from a financial point of view. If you're a company the only reason you should have for not buying Copilot for all your employees is legal concerns, which are definitely still not resolved. Once they are though it's going to be pure masochism to not use Copilot (or similar). Like not paying for CI, or not using Git, or not using an IDE. You can totally still do it but you're going to suffer compared to the competition.
  - rapsey 3y ago
    Of course it does not, but people in finance do not understand engineering. And the C suite needs to make AI plans or wallstreet is going to punish them.
aurareturn 3y ago
I only think of 3 things that can happen: 1. AI becomes so good that I will be out of a job as a software dev 2. AI becomes really good and I will 10x my productivity 3. AI hits a hard ceiling and it might only make me 2x more productive Based on those 3 possibilities, I invest my portfolio like this: 1. 40% goes to the main layer of the AI revolution which are chip manufacturers which is mostly TSMC & Nvidia. I throw some money at Intel as well because geopolitics. If AI is ubiquitous, then we need a lot more silicon. 2. 30% goes to the next layer which is mostly Microsoft, Apple, Google, etc. These are the companies close to consumers. I don't know which one will win out so I spread it across. 3. 30% goes to S&P 500 because productivity increase will benefit all industries. Also, if AI hits the ceiling fast, at least I will have 30% of my money in S&P 500 and not AI bubble companies. I basically invest like I'm going to lose my job. If I don't lose my job, great. If I lose my job, that means my stocks will have to pay for my food.
- dottjt 3y ago
  How would this make sense if the market is a bubble? Bubbles pop by definition and you end up losing everything? Not sure what it has to do with your employment.
  - aurareturn 3y ago
    Because if AI is good enough to permanently end my software dev job, it should be valued much much much higher than the stock market today. I imagine a world where anyone has an AI powerful enough to make apps that used to require a full team of professional software developers and do so much quicker. If we get to that world, I don't see how the stock market wouldn't be significantly higher than today, even if it's in a bubble today.
  - IanCal 3y ago
    You can view your skills as an asset, and balance your investments accordingly. "Lose everything" is a wild stretch. They have 30% in a moderately broad fund. They have a chunk in companies that are still doing non-ai things, then their first part is chip manufacturers. AI could disappear and people would still need computers.
mg 3y ago
One perspective I find interesting is how fast Microsoft grew in the desktop pc area: https://twitter.com/marekgibney/status/1753116011681968552 https://twitter.com/marekgibney/status/1753116011681968552 Back then, for over 10 years, it grew at a pace not seen since then. If Nadella grows Microsoft into the AI area as fast as Gates did in the Desktop area, it would become a 100 trillion dollar company within the next ten years. Is AI a step forward for productivity as big as desktop computers were back then? I think it might be. Not sure what percentage of people became more productive via PCs. And how much more productive they became. But with AI, it seems everyone will benefit from it. And become twice as productive or so within the next 20 years. Programming without an LLM at hand would already feel very clumsy to me these days.
sfc32 3y ago
Started out an interesting read, but lost credibility with me with the "Hold Up" Gif.
- philoinvestor 3y ago
  The content after the Hold Up GIF is the most important part of the article and went viral on twitter a few days ago: https://x.com/SamanthaLaDuc/status/1755366304897253865?s=20 https://x.com/SamanthaLaDuc/status/1755366304897253865?s=20
seydor 3y ago
The nasdaq is 1500 companies, seems the article is about the Mag7. People are putting money back in the sector, it may not be MS or Nvidia, but the money will move to the next big thing that pops up in the nasdaq
- philoinvestor 3y ago
  The Nasdaq 100 is 100 companies. A handful of companies have contributed for all index gains since November 2022. Reference: https://x.com/philoinvestor/status/1755904944069091799?s=20 https://x.com/philoinvestor/status/1755904944069091799?s=20
ManBeardPc 3y ago
So far most of the use cases of AI I see in the wild has been some stupid chat bot, replacing specific job groups or magically solving a problem with AI. All of these attempts fail miserably. It‘s Blockchain and NFTs all over again. The promises are so far fetched from current capabilities that it is not even funny. Not saying that AI is useless, there are many impressive achievements made possible by it, but I do think it’s currently overhyped and filled with empty promises.
- rapsey 3y ago
  It is much more akin to the dotcom bubble. NFTs are entirely useless, the dotcom bubble was just too early (many dumb ideas then are successful now).
  - ManBeardPc 3y ago
    Depends on the use case. I would argue promising capabilities that are not there yet and can’t be developed by the supplier themselves (for example they just fine tune an existing model) in a reasonable timeframe are practically just as useless. Other promises like predicting the future or magically solving security are pretty comparable to NFTs.
- philoinvestor 3y ago
  Exactly. Many of the current applications of AI are just marginal improvements, and very few are disruptive/groundbreaking. Of course no one will tell you that because they are afraid to, in case they get cancelled or lynched.
Roark66 3y ago
>Which means Microsoft (9% of the Nasdaq 100), is using its cash and services to power an AI company which touched $1.6billion in ARR for 2023 but is raising money at a $100 billion valuation.. (raising money at >50X non-profitable sales) I've been saying it for quite some time. The end game of ChatGPT (and similar) services is: 1- Get people used to them so much they can't function without them (without massive drop in productivity, inconvenience etc) 2- Raise the price 3 orders of magnitude 3 -Profit This only works if open source models are so far behind to be essentially unusable as a replacement and traditional internet search becomes completely useless(it has been heading in that direction for a while by now).
- misja111 3y ago
  Just wait until ChatGPT will start to show sponsored content or advertisements ..
eterevsky 3y ago
I don't see it as a bubble at all. Investors see that generative AI has a lot of potential, and invest in the companies that are likely to benefit from it. That's how stock market is supposed to work.
- philoinvestor 3y ago
  If only it were that simple!
Anotheroneagain 3y ago
The problem isn't in the stock market, the problem is the excess production. Trying to boost the economy has the exact opposite effect, and makes everything even worse. You need to slow it down, and boost spending instead.
glimshe 3y ago
Internet investment advice... If the writer was any good, they would quietly invest their money based on their predictions (such as shorting the "bubble" stocks) rather than provide advice for free to everybody else.
- philoinvestor 3y ago
  How basic and linear can you be?
- isthatafact 3y ago
  The advice is not even free. It is $55/month to subscribe to the "newsletter". This post is just an advertisement.
mamonster 3y ago
Current NVIDIA stock is a classic example of a gamma squeeze. If a market maker is short a call/put, he is hedging with stock in the direction of the movement. If you buy out of the money calls(i.e NVDA stock is at 500 and you are buying a 520 call), especially shorter dated ones, then the market maker will end up supporting a rally if it comes around via hedging(this is also exacerbated by the fact that retail, which is the segment of the market usually "aping" into OTMs, doesn't actually trade the vol component of options, meaning that they don't sell short stock as it goes higher).

56 points by philoinvestor 3y ago

philoinvestor 3y ago

Valuations won't keep up with the future, it seems.

rvz 3y ago
Something tells me that lots of people are about to get trapped in the market believing that the AI narrative will make it keep going up forever. It would take a very nasty surprise in the market that will put all of that at risk. I guess the euphoric sentiment in AI is a signal to safely take your money out right now before the stock market gets upset with several companies showing signs of growing geo-political / legal risks and especially extreme over-valuation. Given that a single company is carrying the stock market, it can take one bad event to cascade onto everyone else by surprise.
- jansan 3y ago
  Also, everbody is invested in the same stocks. With ETF this has accelerated and I decided to find some stocks that are underrepresented in ETFs for various reasons and still have a solid, old-fashioned business model.
  - sgu999 3y ago
    Mind sharing a few?
    - deleted 3y ago
      [deleted]

bugbuddy 3y ago

I am at max leverage and all in so I need this rally to keep going.

deviantbit 3y ago
Hold until December or January. Expect volatility over the summer. There is probably about 15-20% left to go. They're expecting more than $20 billion in chip sales alone this quarter. Expect rhetoric out of both political parties over regulation, which will cause additional volatility. Expect a deal between Nvidia and Apple. Apple is behind the curve. Both companies want to control ARM.
- pinkmuffinere 3y ago
  You’re making some very bold predictions. It makes me uncomfortable to see such specific claims, backed up with no data, so soon after the bubble with crypto. You’re either a prophet or overconfident.
  - deviantbit 3y ago
    ycombinator makes it difficult to provide a detailed analysis. But I would recommend you look to history of other melt-ups, and compare. The one notable difference with Nvidia is they actually have a product and revenue. To verify the $20 billion in revenue, go look at their own guidance.
- smoldesu 3y ago
  > Expect a deal between Nvidia and Apple. I'm sooner expecting hell to freeze over. Apple would be rewriting their own history with that kind of deal.
  - deviantbit 3y ago
    I guess you haven't heard. Apple is already under contract with Nvidia for the H200 and B100. I guess hell froze over. Apple will not be able to participate in the AI space w/ out Nvidia. Nvidia dropped CUDA support for MacOS, but Apple is going to have to get it back. Wait for the deal that is coming.

aurareturn 3y ago

Which means Microsoft (9% of the Nasdaq 100), is using its cash and services to power an AI company which touched $1.6billion in ARR for 2023 but is raising money at a $100 billion valuation.. (raising money at >50X non-profitable sales) I don't think $100b for OpenAI is that farfetched. You have way less transformative companies being valued north of $100b. After playing with ChatGPT (using GPT4) and GPT4 API, I'm quite convinced that only 2 things are stopping LLMs from being ubiquitous right now and one of them is simply inference cost. The other is GPT4 being having many intentional guardrails. That's not to mention GPT5 and 6 and so on coming out. You can argue that OpenAI might not hold the lead. That's fine. But the author also argued against Nvidia. Nvidia doesn't care if OpenAI loses the lead because the next LLM lab also uses Nvidia. Note: I'm also invested in the market. Here's my investing strategy at the moment: https://news.ycombinator.com/item?id=39342028#39342362 https://news.ycombinator.com/item?id=39342028#39342362 I'm not a stock picking expert. But I'm investing like I'm going to lose my job as a software dev. If I lose my job, my stocks will surely pay for my food. If I don't lose my job, then it will continue to pay for my food. It's a hedge for myself.

boxed 3y ago
> You have way less transformative companies being valued north of $100b. Transformative maybe, but valuation shouldn't be about transformative, it should be about profitable. This is a lot more doubtful.
- aurareturn 3y ago
  >Transformative maybe, but valuation shouldn't be about transformative, it should be about profitable. My assumption is that LLMs would be ubiquitous right now, just GPT4, not even GPT5, if inference cost is low enough. Therefore, I expect the market for LLMs to expand exponentially in the future once inference cost is solved.
  - ChatGTP 3y ago
    exponentially
  - 3y ago

eganist 3y ago

> The Nasdaq is in an A.I.-led bubble This^^ title is editorialized and possibly deliberately misleading. Article ends with: > I will start working on a piece that will assess whether the NASDAQ (primarily) and hence passive investing as a whole is in a tech and AI-infused reflexive bubble.

philoinvestor 3y ago
The piece is now finished and about to be published in the next couple of days.. So the title is not deliberately misleading. If from what you have read and see in markets, you don't believe that the Naz is in an A.I.-led bubble, then ok.

rapsey 3y ago

Listening to finance and VC podcasts it seems to me quite clear there is a bubble brewing. They are all repeating the same mantras and convincing themselves of a new gold rush. The financial side is convinced developers are 10x as productive with copilot and AI tools. They are and will increasingly be forcing CTOs to get on the copilot bandwagon or risk getting fired. The tech companies are not likely to get fooled, but your average non-tech S&P 500 company is going to be giving MS a fortune. AI companies are getting funded with hundreds of millions/billions with no realistic path to making money (mistral, anthropic, huggingface). The only one making money is nVidia and MS. nVidia, MS and others are frankly committing clear fraud with round tripping money and making a killing. When there is billions being spent on ventures with no business model we are repeating the dotcom bubble. I bet it is going to last a while yet though so plenty of money to be made before the inevitable.

MattGaiser 3y ago
> The financial side is convinced developers are 10x as productive with copilot and AI tools. The opportunity is bigger. It isn't 10x existing developers, but making everyone 3-5x as productive by turning everyone into someone able to automate a basic system. AI could tackle pretty much every knowledge job in the lowest tier of a job pyramid.
IshKebab 3y ago
I don't think copilot makes you 10x more productive. Anyone who has used it can tell you that's nonsense. 30% more productive is way more realistic, but even 30% is clearly worth it from a financial point of view. If you're a company the only reason you should have for not buying Copilot for all your employees is legal concerns, which are definitely still not resolved. Once they are though it's going to be pure masochism to not use Copilot (or similar). Like not paying for CI, or not using Git, or not using an IDE. You can totally still do it but you're going to suffer compared to the competition.
- rapsey 3y ago
  Of course it does not, but people in finance do not understand engineering. And the C suite needs to make AI plans or wallstreet is going to punish them.

aurareturn 3y ago

I only think of 3 things that can happen: 1. AI becomes so good that I will be out of a job as a software dev 2. AI becomes really good and I will 10x my productivity 3. AI hits a hard ceiling and it might only make me 2x more productive Based on those 3 possibilities, I invest my portfolio like this: 1. 40% goes to the main layer of the AI revolution which are chip manufacturers which is mostly TSMC & Nvidia. I throw some money at Intel as well because geopolitics. If AI is ubiquitous, then we need a lot more silicon. 2. 30% goes to the next layer which is mostly Microsoft, Apple, Google, etc. These are the companies close to consumers. I don't know which one will win out so I spread it across. 3. 30% goes to S&P 500 because productivity increase will benefit all industries. Also, if AI hits the ceiling fast, at least I will have 30% of my money in S&P 500 and not AI bubble companies. I basically invest like I'm going to lose my job. If I don't lose my job, great. If I lose my job, that means my stocks will have to pay for my food.

dottjt 3y ago
How would this make sense if the market is a bubble? Bubbles pop by definition and you end up losing everything? Not sure what it has to do with your employment.
- aurareturn 3y ago
  Because if AI is good enough to permanently end my software dev job, it should be valued much much much higher than the stock market today. I imagine a world where anyone has an AI powerful enough to make apps that used to require a full team of professional software developers and do so much quicker. If we get to that world, I don't see how the stock market wouldn't be significantly higher than today, even if it's in a bubble today.
- IanCal 3y ago
  You can view your skills as an asset, and balance your investments accordingly. "Lose everything" is a wild stretch. They have 30% in a moderately broad fund. They have a chunk in companies that are still doing non-ai things, then their first part is chip manufacturers. AI could disappear and people would still need computers.

mg 3y ago

One perspective I find interesting is how fast Microsoft grew in the desktop pc area: https://twitter.com/marekgibney/status/1753116011681968552 https://twitter.com/marekgibney/status/1753116011681968552 Back then, for over 10 years, it grew at a pace not seen since then. If Nadella grows Microsoft into the AI area as fast as Gates did in the Desktop area, it would become a 100 trillion dollar company within the next ten years. Is AI a step forward for productivity as big as desktop computers were back then? I think it might be. Not sure what percentage of people became more productive via PCs. And how much more productive they became. But with AI, it seems everyone will benefit from it. And become twice as productive or so within the next 20 years. Programming without an LLM at hand would already feel very clumsy to me these days.

sfc32 3y ago

Started out an interesting read, but lost credibility with me with the "Hold Up" Gif.

philoinvestor 3y ago
The content after the Hold Up GIF is the most important part of the article and went viral on twitter a few days ago: https://x.com/SamanthaLaDuc/status/1755366304897253865?s=20 https://x.com/SamanthaLaDuc/status/1755366304897253865?s=20

seydor 3y ago

The nasdaq is 1500 companies, seems the article is about the Mag7. People are putting money back in the sector, it may not be MS or Nvidia, but the money will move to the next big thing that pops up in the nasdaq

philoinvestor 3y ago
The Nasdaq 100 is 100 companies. A handful of companies have contributed for all index gains since November 2022. Reference: https://x.com/philoinvestor/status/1755904944069091799?s=20 https://x.com/philoinvestor/status/1755904944069091799?s=20

ManBeardPc 3y ago

So far most of the use cases of AI I see in the wild has been some stupid chat bot, replacing specific job groups or magically solving a problem with AI. All of these attempts fail miserably. It‘s Blockchain and NFTs all over again. The promises are so far fetched from current capabilities that it is not even funny. Not saying that AI is useless, there are many impressive achievements made possible by it, but I do think it’s currently overhyped and filled with empty promises.

rapsey 3y ago
It is much more akin to the dotcom bubble. NFTs are entirely useless, the dotcom bubble was just too early (many dumb ideas then are successful now).
- ManBeardPc 3y ago
  Depends on the use case. I would argue promising capabilities that are not there yet and can’t be developed by the supplier themselves (for example they just fine tune an existing model) in a reasonable timeframe are practically just as useless. Other promises like predicting the future or magically solving security are pretty comparable to NFTs.
philoinvestor 3y ago
Exactly. Many of the current applications of AI are just marginal improvements, and very few are disruptive/groundbreaking. Of course no one will tell you that because they are afraid to, in case they get cancelled or lynched.

Roark66 3y ago

>Which means Microsoft (9% of the Nasdaq 100), is using its cash and services to power an AI company which touched $1.6billion in ARR for 2023 but is raising money at a $100 billion valuation.. (raising money at >50X non-profitable sales) I've been saying it for quite some time. The end game of ChatGPT (and similar) services is: 1- Get people used to them so much they can't function without them (without massive drop in productivity, inconvenience etc) 2- Raise the price 3 orders of magnitude 3 -Profit This only works if open source models are so far behind to be essentially unusable as a replacement and traditional internet search becomes completely useless(it has been heading in that direction for a while by now).

misja111 3y ago
Just wait until ChatGPT will start to show sponsored content or advertisements ..

eterevsky 3y ago

I don't see it as a bubble at all. Investors see that generative AI has a lot of potential, and invest in the companies that are likely to benefit from it. That's how stock market is supposed to work.

philoinvestor 3y ago
If only it were that simple!

Anotheroneagain 3y ago

The problem isn't in the stock market, the problem is the excess production. Trying to boost the economy has the exact opposite effect, and makes everything even worse. You need to slow it down, and boost spending instead.

glimshe 3y ago

Internet investment advice... If the writer was any good, they would quietly invest their money based on their predictions (such as shorting the "bubble" stocks) rather than provide advice for free to everybody else.

philoinvestor 3y ago
How basic and linear can you be?
isthatafact 3y ago
The advice is not even free. It is $55/month to subscribe to the "newsletter". This post is just an advertisement.

mamonster 3y ago

Current NVIDIA stock is a classic example of a gamma squeeze. If a market maker is short a call/put, he is hedging with stock in the direction of the movement. If you buy out of the money calls(i.e NVDA stock is at 500 and you are buying a 520 call), especially shorter dated ones, then the market maker will end up supporting a rally if it comes around via hedging(this is also exacerbated by the fact that retail, which is the segment of the market usually "aping" into OTMs, doesn't actually trade the vol component of options, meaning that they don't sell short stock as it goes higher).