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Nvidia is a hard to value stock though. The revenue growth, while insanely high (120% annualized quarter over quarter), is decelerating. But the net income leve

Nvidia is a hard to value stock though. The revenue growth, while insanely high (120% annualized quarter over quarter), is decelerating. But the net income levels are insane (55% net income margin on revenue). This suggests huge space for competition to drive earnings growth down. But it's unclear when that will happen.

nicolashahn 3y ago
Who would be the one to actually provide competition? AMD, Intel, someone else?
- Octoth0rpe 3y ago
  I'd predict Amazon and MS. A huge portion of Nvidia's revenue is from data centers run by amazon/MS, and they both have at least some experience in designing their own chips (more on Amazon's end with Graviton). I'd expect that they are both motivated to try to design something in house that is more suited to their needs and cuts out the nvidia profit margin.
- Detrytus 3y ago
  Yes, AMD (which has great GPUs, but sucks at software), Intel (that's improving rapidly on GPU side), and possibly Google with their Tensor. Also, AWS has their dedicated AI chips, aptly named Trainium and Inferentia. Theoretically even Apple could start producing AI chips based on their Neural Engine. The better NVIDIA's results are now the more that encourages the competitors to try and take some of the cake for themselves.
- baq 3y ago
  Yes. And more you've heard about. And yet more you haven't, since they're in stealth.
- hilux 3y ago
  My impression is that AMD has always had technically competitive products, but lagged in software and ecosystem and marketing. (It had a long line of dud CEOs.) Lisa Su (Jensen's cousin, btw) seems to have turned the ship around.
  - foobarian 3y ago
    > Lisa Su (Jensen's cousin, btw) TIL! Wow, that's wild.
  - outside415 3y ago
    they're a fast follow that competes for the middle and low end of the market. they won't produce anything that competes with NVIDIA's topend any time soon. Will take some outside competitor like LPUs or something that comes and changes the game to make a dent, that will take a while though I reckon. Hardware revolutions take years to scale.
- adam_arthur 3y ago
  Model inference can be done with any GPU, AMD, Nvidia, Intel. Can even be done with CPU in many cases. Training is largely done on Nvidia cards, but there's nothing mandating that. Google trained Gemini on their own in-house TPUs, and according to their published stats it exceeds ChatGPTs performance. There's a collective delusion right now that somehow CUDA entitles Nvidia to a forever monopoly on GPU compute. There's no way they will maintain ~90% gross margins on their hardware sales. It's far too economically inefficient for purchasers in the long run. The ones who figure out how to use competitor cards at less than half the cost will have a huge advantage Right now it's fevered money pouring into what they see as the fastest way to get their feet into the game. Nvidia will do well, but that's already more than priced in right now.
  - versteegen 3y ago
    Their gross margin for Q4 is 76% (was 63% a year ago).
    - adam_arthur 3y ago
      Across all products. Margin is likely higher for the newer product lines. But anyway, good to pull an exact figure!
- HDThoreaun 3y ago
  When margins are above 75% everyone and their mother wants a piece of the pie.
zamfi 3y ago
They're producing hardware...there are physical limits to growth rate. Is growth decelerating because there's only so much chipmaking capacity available, or is it because of a demand slowdown? The net income levels suggest maybe it's the former. Totally open to being wrong here!
- xetplan 3y ago
  There is this whole section in the 10-k about government regulation too. Some of that has to be causing growth deceleration vs what it could be. Given what we currently know, it is hard to say this valuation is irrational or crazy as some are saying in this thread. What is crazy is Palantir up 4% after hours because of NVDA earnings. We are certainly selling a ton of pickaxes, pans and shovels here. Not sure about how much gold we are really finding.

nicolashahn 3y ago

Who would be the one to actually provide competition? AMD, Intel, someone else?

Octoth0rpe 3y ago
I'd predict Amazon and MS. A huge portion of Nvidia's revenue is from data centers run by amazon/MS, and they both have at least some experience in designing their own chips (more on Amazon's end with Graviton). I'd expect that they are both motivated to try to design something in house that is more suited to their needs and cuts out the nvidia profit margin.
Detrytus 3y ago
Yes, AMD (which has great GPUs, but sucks at software), Intel (that's improving rapidly on GPU side), and possibly Google with their Tensor. Also, AWS has their dedicated AI chips, aptly named Trainium and Inferentia. Theoretically even Apple could start producing AI chips based on their Neural Engine. The better NVIDIA's results are now the more that encourages the competitors to try and take some of the cake for themselves.
baq 3y ago
Yes. And more you've heard about. And yet more you haven't, since they're in stealth.
hilux 3y ago
My impression is that AMD has always had technically competitive products, but lagged in software and ecosystem and marketing. (It had a long line of dud CEOs.) Lisa Su (Jensen's cousin, btw) seems to have turned the ship around.
- foobarian 3y ago
  > Lisa Su (Jensen's cousin, btw) TIL! Wow, that's wild.
- outside415 3y ago
  they're a fast follow that competes for the middle and low end of the market. they won't produce anything that competes with NVIDIA's topend any time soon. Will take some outside competitor like LPUs or something that comes and changes the game to make a dent, that will take a while though I reckon. Hardware revolutions take years to scale.
adam_arthur 3y ago
Model inference can be done with any GPU, AMD, Nvidia, Intel. Can even be done with CPU in many cases. Training is largely done on Nvidia cards, but there's nothing mandating that. Google trained Gemini on their own in-house TPUs, and according to their published stats it exceeds ChatGPTs performance. There's a collective delusion right now that somehow CUDA entitles Nvidia to a forever monopoly on GPU compute. There's no way they will maintain ~90% gross margins on their hardware sales. It's far too economically inefficient for purchasers in the long run. The ones who figure out how to use competitor cards at less than half the cost will have a huge advantage Right now it's fevered money pouring into what they see as the fastest way to get their feet into the game. Nvidia will do well, but that's already more than priced in right now.
- versteegen 3y ago
  Their gross margin for Q4 is 76% (was 63% a year ago).
  - adam_arthur 3y ago
    Across all products. Margin is likely higher for the newer product lines. But anyway, good to pull an exact figure!
HDThoreaun 3y ago
When margins are above 75% everyone and their mother wants a piece of the pie.

zamfi 3y ago

They're producing hardware...there are physical limits to growth rate. Is growth decelerating because there's only so much chipmaking capacity available, or is it because of a demand slowdown? The net income levels suggest maybe it's the former. Totally open to being wrong here!

xetplan 3y ago
There is this whole section in the 10-k about government regulation too. Some of that has to be causing growth deceleration vs what it could be. Given what we currently know, it is hard to say this valuation is irrational or crazy as some are saying in this thread. What is crazy is Palantir up 4% after hours because of NVDA earnings. We are certainly selling a ton of pickaxes, pans and shovels here. Not sure about how much gold we are really finding.