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Nvidia hits $2T valuation as AI frenzy grips Wall Street
- setheron 3y agoThe market is really testing being irrational longer than I can withstand.
- weatherlight 3y agoSpoiler alert: The market has never been rational.
- blantonl 3y agoSpoiler alert: there's a decent argument to be made that the market has never been irrational either. It's just a matter of timing to allow the markets to adjust. A market in of itself is never perfect.
- weatherlight 3y agoRationality is binary. the very occurrence of speculative bubbles, (to be pedantic; where asset prices soar well beyond their intrinsic values and eventually crash) is a strong argument against market efficiency.
- blantonl 3y agoThen if markets are always non-efficient, but they "work", I'd argue that they aren't irrational, they are simply quite rational in doing their overall job over time.
- weatherlight 3y agoI think you are confusing efficiency and effectiveness. Markets, when regulated, can be an effective way to distribute goods and services.
- RandomLensman 3y agoEquity markets tend to be reasonably efficient - we can debate the extent of the efficiency and how exactly we define things like "weakly efficient" etc.
- RandomLensman 3y agoHow do you know the "intrinsic value" of share? In most cases that is inaccessible.
- deleted 3y ago[deleted]
- AnimalMuppet 3y agoDisagree. Nobody is perfectly rational. So if you make rationality binary, then everyone and everything is irrational. That's not a useful definition. It's more useful to notice that, while everyone and everything is irrational, some are far more irrational than others. That is, it's much more useful to not consider it a binary.
- precompute 3y agoAt least it used to have the decently to play-act at being so.
- arrowleaf 3y agoHah, when? It's always been a random walk.
- precompute 3y agoThe market used to crash, people used to be able to afford houses without going into proto-slavery. Thousands of people used to enter a single store on black friday. We used to be a country.
- silent_cal 3y agoIt's not, but individual investors can still be rational.
- digging 3y agoCan they? If it's possible, I don't think it's the rule.
- lotsofpulp 3y agoThe market is so irrational that the most profitable businesses with the highest profit margins and scalability and highest barriers to entry have the highest market capitalizations.
- hindsightbias 3y agoThis is just a hallucinatory phase.
- marvin 3y agoIt's been irrational since the Industrial Revolution; future growth has never been priced in even to the level of a reasonable discount rate.
- arrowleaf 3y agoThe time value of money is constantly in flux, so even if future growth were priced in / perfect market theory held, prices would still change with P/E swings as investors can get more or less for their money elsewhere.
- coldpie 3y agoThe "economics" part of the stock market is just a fig leaf to let people pretend it's not just another form of gambling. It's OK to enjoy it, lots of people like poker and blackjack. But don't pretend it's something more than that. The market is exactly as rational as a deck of cards.
- seydor 3y agoThe market is rational about AI. it's truly going to be transformational. They are irrational about NVIDIA but hey, when money flows out from NVDA it will go to the next AI company, it's not like the sector will deflate
- decafninja 3y agoI bought AAPL back in 2005. Since then I've heard again and again about how the stock will come plummeting down because of what a dumb laymen investor like myself would just call "Accounting Stuff" - such as P/E, etc. The same would go for many other companies, especially in the tech sector. Almost 20 years later, almost none of it has come true. Maybe it is irrational, but at this point, it feels like the irrationality is likely to outlive anyone here.
- skippyboxedhero 3y agoAAPL's P/E has almost always been extremely low in that period (and still is iirc, they have a ton of cash on hand which you need to back out). After 2008, AAPL was trading for something like 7x earnings, GOOG same, MSFT same. The funniest part is that people genuinely don't understand that these examples disprove the point they are making. (And yes, NVDA is obviously overvalued...)
- decafninja 3y agoI didn't understand P/E in 2005, and to be honest, I still don't fully. All I know is that it's been one of the terms being thrown around during the past 20 years as a reason why Apple's stock price will plummet to the ground and why I'm stupid for investing a large portion of net worth in it. At this point, my upside is immense so unless something absolutely catastrophic happens, odds are it seems I'll be having the last laugh.
- Invictus0 3y agoA genie gives you $1 per year in perpetuity. You are engaged in a bidding war to buy the genie and need to figure out your best price. The price you (the market) are willing to pay is the PE ratio.
- ryandrake 3y agoI mean, you know this, but this is only true for the most basic, dividend issuing non-growth company. Most of the genies don't give you anything per year. Their only value is the amount you can re-sell the genie for. EDIT: I guess I don't understand the "gives you $1" part if we're not talking about dividends.
- dagmx 3y agoOn the one hand, I totally understand why they’re in this position: there’s no competition and there’s only demand. On the other hand: I feel like this is a bubble that’s going to pop. Everyone is promising AI futures and I just see a skirmish to bring a product to market that will leave a lot of folks crashing. Either way, NVIDIA wins. I am amazed how much the rest of the silicon industry has slept on this. I know AMD have their competition, but their GPU software division keeps tripping over itself. Intel could have done more but got complacent for a solid few years. Qualcomm feels like a competitor in the making with Nuvia but is late to the dance. Apple is honestly the biggest competitor in terms of hardware and software ecosystem , but refuses to get into the data center. And of course I’m leaving out the Chinese companies like Huawei who would be a force to be reckoned with if it weren’t for sanctions. But China is also a hotspot for AI/ML.
- sleepingreset 3y agoNVIDIA was first to run with the wind. Jensen Huang made a big bet on AI, sent all the researchers his cards, made the world run on CUDA. By the time AMD/Intel woke up to the AI tsunami, the sea had already turned green.
- ra7 3y agoAnd Google has TPUs that can compete with Nvidia, but they want to hoard it all and don't want to sell outside of GCP. How well Nvidia can hold its current valuation depends on how useful the new AI/LLM ecosystem will become. Just chat apps and summarizing documents aren't that IMO.
- thelastgallon 3y agoIf Google can sell TPUs, perhaps they can add a trillion or two to their market cap?
- ra7 3y agoGoogle seems to be perennially disinterested in selling products that require large scale physical operations. I'm surprised they're still in the Pixel phone game.
- cj 3y agoGoogle: 1.80T (P/E 26.81) Apple: 2.84T (P/E 28.60) Microsoft: 3.07T (P/E 37.47) Nvidia: 2.02T (P/E 67.63) Quite astonishing.
- CamelCaseName 3y agoTrailing vs. Forward P/E.
- lm28469 3y agohttps://www.youtube.com/watch?v=hR45ja3VjGE https://www.youtube.com/watch?v=hR45ja3VjGE HFV for Hypothetical Future Value: get ready for the quazillion dollar!
- saalweachter 3y agoCan't spell "hypothetically" without "hype".
- Sohcahtoa82 3y agoWe need to coin the term "hyperthetically". "hypo" means under or less than.
- Wytwwww 3y agoNvidia's valuation is perfectly reasonable if you expect that they'll manage to grow at a similar pace for the next couple of years and will retain their obscenely high margins. Of course for that not only does the AI hype need to continue but their competitors need to fail so bad they wouldn't even be able to offer anything even with 2-5x lower margins. OTH Especially Apple is not doing that great at all (and if above assumptions hold they are much more overvalued than Nvidia is). Their revenue this year is estimated to be lower than in 2022 while Nvidia's more than doubled and Microsoft is growing 5% or so per year.
- jejeyyy77 3y agothe market is forward looking - the sooner you understand that, the less money you will lose ;)
- spintin 3y agoPeople don't get it: it's not AI that is valued high, it's the dollar that is worthless. If the US wants to win in Ukraine it needs to print like a mad man, look at the SPR; it tells you the truth (albeit with 3 months lag for mere mortals). This is the end game, no matter what the eternal growth crowd says. How money (and empires) die.
- dageshi 3y agoThe US is spending the equivalent of pocket change in Ukraine, if a decade+ of war in Afghanistan and Iraq didn't blow the US up, funding the Ukrainians certainly isn't.
- darthrupert 3y agoUSA is not fighting in Ukraine. Ukraine is. To suggest otherwise disregards their exceptional heroism.
- the_doctah 3y agoIt's referred to as a proxy war for a reason. Naked idealism is worthless. How many US dollars is their heroism worth?
- darthrupert 3y agoHow much money was lost when Hitler wasn't stopped in time? Roughly that much.
- thendrill 3y agoUkraine fighting on behalf of the USA. Better ?
- wiseowise 3y agoUkraine is fighting on behalf of Ukraine.
- darthrupert 3y agoKinda dumb that I didn't pour every bit of cash to their stock when chatgpt was released... it was kinda obvious... but so it goes.
- cdelsolar 3y agoYou can still do it
- Workaccount2 3y agoI was telling my girfriend this last night, hah. I was aware that ChatGPT was a gamechanger when it was released. I was also aware that Nvidia was the only one making the hardware. But I'm just not the type to immediately jump to "How can I best profit from this?" Rather than researching stocks, I researched transformers more.
- rvnx 3y agoThe issue is that the market doesn't necessarily react rationally. The fact that OpenAI valuation raises was very understandable (but not easy to invest in practice + the corporate structure is shady). However, Nvidia, it's a very optimistic hype, as the cards are very likely to get replaced with more specialized AI chips in the near-term. Probably by Apple first, then whoever wakes up. Also, once you built your big datacenter with all these cards, then you don't renew them every year.
- chii 3y ago> market doesn't necessarily react rationally. market reacts rationally - just not your brand of rational.
- wing-_-nuts 3y agoI gotta be honest, I looked at chat gpt, thought just doing LLM inference is not that hard, someone will produce an ASIC that destroys nvidia's margins here. You could honestly make a hedge fund by listening to me pontificate things and then betting opposite of me. I have been bearish on MS, twitter, dropbox, bitcoin, the list goes on. It's admirable how I am so consistently wrong.
- weatherlight 3y agoMan, all that Nvidia stock I bought back in 2016 because I thought the Oculus Rift was cool is really starting to pay off.
- kratosatreus 3y agoGj
- endisneigh 3y agoI’m genuinely curious: have we seen profit (not revenue) increases from these companies buying these GPUs and deploying AI models? What’s an AI product that’s actually making a lot of money (profit)? I cannot find reliable stats on how much profit OpenAI actually generates.
- kratosatreus 3y agoJust like anything these days, profit comes when they bring the inference and hosting costs down. VCs are playing the scale game with AI companies
- fnordpiglet 3y agoI wouldn’t expect anything meaningful at what is essentially a year and a half into the practical build cycle. Top to bottom nothing is optimized, use cases not fully established. There’s an awful lot of FUD on HN about this being like crypto. In a decade of trying I never found a meaningful and practical use case for crypto beyond “HODL.” For generative AI we are finding immediately useful applications under nearly every rock we turn over, with increasingly powerful results. These aren’t speculative, they’re allowing us to do things at scales we couldn’t imagine a few years ago. I’m seeing this with most my professional network involved in high end tech. The tool chains suck, and we are limited by GPU capacity as well as inference costs, but these are short term constraints. As patterns solidify the tool chains will too, GPU capacity is ramping up rapidly, and there are plenty of optimizations on the horizon. I for one see this much more akin to the gold rush of the internet over the 1994-2020 time frame in super fast motion. Will we overshoot? Absolutely. But the effect is real.
- NewJazz 3y agoLotta words to answer no. I also would challenge your "year and a half" timeline... Gen ai has been around.
- fnordpiglet 3y agoYes, but not practically useful in general cases prior to GPT4 level models.
- lm28469 3y ago> Its rapid ascent in the past year has led analysts to draw parallels to the picks and shovels providers during the gold rush of 1800s as Nvidia's chips are used by almost all generative AI players from chatGPT-maker OpenAI to Google. Yeah it's the exact same scenario, except for... you know... the gold part. Everything is a gold mine when you print money like there is no tomorrow and your entire economy is based on debt
- bboygravity 3y agoAlso NVIDIA has been caught round-tripping money to artificially create a higher turn-over and profit on the books around the year 2000. They would never dare doing that again, right? Right?!
- the_doctah 3y agoNancy Pelosi is an investing visionary, clearly.
- greenavocado 3y agoWhere can I find a feed of her current positions and trades?
- lm28469 3y agohttps://www.capitoltrades.com/politicians/P000197 https://www.capitoltrades.com/politicians/P000197
- ookblah 3y agoYou can only sell shovels as long as people are making or have the hope of striking gold. NVIDIA destroying earnings means nothing because they are just selling shovels as fast as they can. This "bubble", if it is one, will pop when everyone finds out that buying every last card didn't actually help their bottom line after all.
- cs702 3y agoEvery non-tech company in the world is trying to figure out an "AI strategy," but most executives have no clue as to what they're doing or ought to be doing. They're like patsies with money joining a game of poker they don't understand. They are on track to learn predictable lessons that cannot be learned in any other way. Every provider of "AI as a Service" is spending money like a drunken sailor who just came back after spending six months at sea. None of these providers are charging enough to cover the cost of development, training, or even inference. There's a lot of FOMO: no tech company wants to be left out of the party. Nvidia, as the dominant software-plus-hardware platform (CUDA is a huge deal), is the main beneficiary of all this FOMO. A lot of unprofitable spending in AI ends up becoming... a juicy profit for Nvidia. We're witnessing large-scale transfer of wealth, from the FOMO crowd and clueless end-users to mainly one company. The $2T question is: Is all this FOMO sustainable in the long run?
- abraxas 3y agoIt's the classic shovels in a gold rush model. I just wonder what happened to the shovel makers after the gold rush petered out...
- mertd 3y agoSeller did great. They have a university named after them just a few miles off of Nvidia HQ.
- helsinkiandrew 3y agoIf you don't know who (like I didn't) it was Leland Stanford.
- dreamcompiler 3y agoThe university is named for the seller's late son, not himself.
- sib 3y agoSince the son (Leland Stanford Jr) was named after the seller, I guess you could still say it was named after him...
- mikewarot 3y agoIf you can just put the parameters into the multipliers in these layers, and leave them there while you cycle through the training data, you can use a lot less bandwidth to the compute hardware. Imagine a pipeline where you can feed through a billion tokens/second, each layer of the model persistently mapped to part of a grid of chips. I suspect we're going to end up with a wildly different architecture before it's all over.
- ethagnawl 3y ago> I suspect we're going to end up with a wildly different architecture before it's all over. This is my naïveté showing but aren't GPUs (relatively) general purpose? Do "AI" workflows require that flexibility or would they be better served by special purpose hardware? To use the obvious analogy, what happened with cryptocurrency mining moving from GPU to ASIC.
- anonomousename 3y agoYes - I believe the shift is coming. For inference especially, check out Groq’s chip design and its simplicity and speed compared to general purpose GPUs.
- jokoon 3y agoCapitalism, hype and irrationality are a good combination for a bubble. I remember this famous AI professor Andrew Ng in an online lecture, talking about his "AI dream" and his enthusiasm to reach general intelligence. Even John Carmack boarded that ship, and I don't see he is going to deliver, and honestly I don't really trust him to deliver some real skepticism about AI if he doesn't deliver something good. We really need more skeptical professors and experts to talk more on how AI is not as great as it seems. The inventor of SIRI did a great talk about this. Apparently people seems to confuse and conflate "making quality deepfakes" and "AI is useful". It's weird when I am a developer, and I really want LESS technology.
- PKop 3y ago>"making quality deepfakes" and "AI is useful" Excellent point, as the broad output of most of this so far is just more fake garbage that clutters everything up with generated spam (except to be fair the code tools like copilot). Reminds me of 3D printing, seemingly under-delivering on the massive hype in terms of "what can it actually produce". Recent VR hype feels the same in relation to expectations and cost of the products vs usefulness.
- humansareok1 3y agoSIRI? SIRI is your go to example? Have you even been awake at all since 2020? IF you really can't see any utility for current gen GenAI beyond deepfakes there's really no hope for you.
- anon291 3y agoAI is already useful. You must be living under a rock if you can't see it. I'm a luddite in general, but just the text embeddings and retrieval stuff is worth a goldmine. Moreover, the natural language generation capability is yet another "obvious" example of utility. Since when has a computer even been able to produce even moderately natural language from structured data. Even ignoring 'general AI' (whatever that is... no one even knows what that means), that's already enough utility. Just the searching ability makes it easily more valuable than Google and Bing in their original incarnations.
- surcap526 3y ago[flagged]
- sigspec 3y agoWall Street is a scam. We can't move on as a society while it is in control.
- 2sk21 3y agoNvidia of today reminds me a lot of Cisco of thirty years ago. Back then when the Internet was starting to take off, Cisco was one of the few companies actually making any money from the Internet. The frenzy to buy Cisco was intense. Thirty years later, Cisco still exists but absolutely nobody is excited about them.
- Symmetry 3y agoThe question is how much of the gains from advances in AI the current leaders will be able to capture. I'm actually guessing more than in the Internet boom peaking in 2000 but I'm not actually sure. If the players remain static we might see more custom silicon designed by them the way Google does with its TPUs which is why I'm not putting too many eggs in the NVidia basket but also Broadcomm, TSMC, etc.
- digging 3y ago> Thirty years later, Cisco still exists but absolutely nobody is excited about them. What is the lesson you take from this, though? To me, the lesson is that "Predicting the future is hard." No matter how well you're doing, you still need to make some sort of prediction of the future to stay on top. If you get $2 billion and want to stay a billionaire, you can bury it underground and predict that inflation will be minimal, or you can invest it and predict that investments will be profitable. Either prediction could be wrong. (But they're not equally likely.) In that same vein, even though Cisco was printing money, the world changed. The world will always change. It's not necessarily a failure that they couldn't predict and invent the next money printer.
- 2sk21 3y agoMy point is that while Cisco was an early winner, Amazon and Google started growing a few years later and were much larger winners in the end. I think there is a possibility that history may repeat with Nvidia -but I have no idea what new companies are going to rise in the AI era.
- nazka 3y agoFor Nvidia to become like Cisco we need 2 things. 1. AI will become easy at all level with no big revolution and 2. Nvidia will not diversify and invest in the next big thing. I am not sure of 1 but certainly not 2. Maybe if the next big thing has nothing to do with computer hardware or AI.
- tempodox 3y agoSelling shovels in a gold rush not only makes you rich, it also isolates you from the greatest part of the risk. Nvidia got lucky.
- brigadier132 3y agoSpending 20 years focusing on building the best chips and software for scientific computing and artificial intelligence when it was not a massive market in anticipation of it existing is not luck, it's prescience. It's also obvious in retrospect but only one company managed to do it.
- jjkeddo199 3y agoFor scale: The global box office revenue of every single nation's film industry combined is about 42 billion dollars as of 2019. Nvidia's growth in market cap of ~350 billion since end of 2022 to 2 trillion today is almost enough to account for the entire 1.6 trillion (6%) growth in US economy for 2023. Nvidia single-handedly carried the United States of America's 2023 GDP from recession territory (0% growth) to unprecedented massive economic boom (6% growth)! -- https://en.wikipedia.org/wiki/Film_industry https://en.wikipedia.org/wiki/Film_industry https://www.bea.gov/news/2024/gross-domestic-product-fourth-quarter-and-year-2023-advance-estimate#:~:text=Within%20imports%2C%20the%20decrease%20primarily,(tables%201%20and%203) https://www.bea.gov/news/2024/gross-domestic-product-fourth-....
- behindsight 3y agoNvidia's revenue is ~$60 billion dollars. But in all honesty, the box office numbers aren't as impressive as the longtail licensing and merchandising. That's where the real money is made for the movie franchises.
- oezi 3y agoDoesn't the 42bn USD of the film industry include longtail and licensing?
- sib 3y agoUS Domestic Box Office was about $7.5B in 2022 and $8.9B in 2023. So if there's a number of $42B, it is including a lot of other revenue.
- Sohcahtoa82 3y agoMerchandising, Merchandising! https://youtu.be/vjB8XXw9y70 https://youtu.be/vjB8XXw9y70
- sib 3y agoMarket Cap (and, therefore, growth in Market Cap) is not a component of GDP. Also, to the extent that the chips are built in Taiwan, I'm not sure that they count in the US's GDP at all.
- m3kw9 3y agoIt’s only a frenzy because the news is focused on the stock. If you look at stock like Meta and Netflix they also have a jet engine at full blast just a few months back, and it was just passing news. This is how a stock goes up more, it also helps NVidia because they can raise more money if he choose and attract Fomo into their products. The massive demand is priced in as Jenson indicated, it’s now a bet on how much more past the next quarter.
- deleted 3y ago[deleted]
- ksec 3y agoNvidia Growth Potential. Current Revenue ~$100B. Revenue of its competitors. Intel ~60B AMD ~20B Broadcom ~35B Qualcomm ~35B Mediatek ~13B
- siliconc0w 3y agoIt's a bit of a leading indicator - their current revenue is from infrastructure being built by big tech making 'foundation models', there is a lot riding on: * transformer architecture can continue to scale to become good enough and fast enough for real use-cases * useful real-life applications (or even operating systems) will be built on this infrastructure * alignment, data governance, privacy, or hallucination issues are solvable (or at least mitigatable). * supportive regulatory environment, limited legal liability for users. * China won't take advantage of the current geo-political clusterfuck to move on its ambitions for Taiwan. I'm sure there is more, basically there is a lot that needs to happen or not happen for Nvidia to continue to be the perceived winner here.
- mancerayder 3y agoWhy aren't AMD and Intel a screaming speculative investment at this point? How far behind can they be?