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Every 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. Th
by cs702 3y ago
Every 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...
- helsinkiandrew 3y agoThe same thing that Nvidia did after graphics cards and then crypto mining became less profitable - diversified.
- ryandrake 3y agoNvidia has really managed to capitalize very well on multiple "Compute that does nothing important" trends. From 3D games to crypto mining, now to AI. Jensen Huang seems to have a crystal ball that can predict what people will waste compute on in the next 5 years.
- ydnaclementine 3y agoIs he really predicting, or are the areas where GPUs are becoming useful increasing in number?
- idiotsecant 3y agoWhat exactly is 'something important' if those things don't meet your metric?
- Sohcahtoa82 3y agoI think you really have cause-and-effect backwards. First off, 3D games existed before NVIDIA. NVIDIA wasn't even first to market for making dedicated 3D acceleration hardware. CUDA existed before Bitcoin and was used for physics and chemistry simulations when it first came out. > "Compute that does nothing important" Entertainment is important, so to just toss 3D games aside is asinine. I'll agree that crypto-mining is completely worthless. As far AI, certainly there's a lot of hype around it right now, and we're probably gonna see a lot of AI startups go belly-up in the next couple years, but it's definitely not a fad and isn't going away. Being highly dismissive doesn't make you cool or edgy, just so you know.
- ryandrake 3y agoI mean, I'm a 3D gamer myself and I'm happy we have GPUs. Just being realistic about their importance. I am fully aware I'm burning kilowatts of energy so that the leaves in Red Dead Redemption 2 look beautiful.
- dreamcompiler 3y agoHave you ever worn Levis jeans? He did okay.
- bcx 3y agoMuch of the sf area old money comes from folks selling tools into the gold rush, for example Folgers started serving coffee to miners, Levi’s selling jeans, Wells Fargo.
- deleted 3y ago[deleted]
- dig1 3y agoExactly. Every startup these days is shoveling "AI" in their summary or description, trying to attract some VC money. Reminds me of the crypto/blockchain bubble a few years ago. Guess, Nvidia again was the main beneficiary :)
- arcticbull 3y agoMy favorite moment was when the Long Island Iced Tea company (a subsidiary of Long Island Brand Beverages, LLC) renamed themselves Long Blockchain Corp in 2017 causing their share price to quadruple. They then got de-listed by the SEC and several individuals were charged with insider trading. [1] [1] https://en.wikipedia.org/wiki/Long_Blockchain_Corp https://en.wikipedia.org/wiki/Long_Blockchain_Corp
- ToucanLoucan 3y agoThe entire tech sector is addicted to these hype bubbles. Previously they were for actually new things, things like the Internet, portable computers, the first smart phones, the first touch-screen smart phones, etc. Now we just get smaller and smaller iterations on previous products, and the marketing for these companies has no language for incremental, basic improvements so instead we're sold a phone that's 15% faster like it's the second coming of Christ, and for some reason, people keep falling for it. I've predicted already the AI hype train will crash into the wall of reality in more or less the same way the crypto one did, and then the grifters will move on to the next thing they can over-hype.
- Clubber 3y agoIt's just another boom and bust cycle, like the cycle that ended in the dot bomb. AI will be hugely profitable for the companies who figure out how to monetize it the best, but for the rest, not so much.
- bryanlarsen 3y agoCisco seems the most reasonable analogy to me. They were the ones selling shovels during the Internet boom. The Internet market is many orders of magnitude larger today than it was during CSCO's peak. CSCO is still highly profitable but it's stock price is still well off its peak.
- aurareturn 3y agoNvidia’s PE is still 3x less than Cisco’s peak.
- cdchn 3y agoSo hold until Nvidia hits 200 P/E or play chicken with the bust of the AI bubble.
- ksec 3y ago>Cisco seems the most reasonable analogy to me. Cisco at its peak in 1999 had a P/E ratio of near 200. Nvidia trailing 12 months is closer to 50. ( Today it is closer to 60 ). So I dont think Cisco is a good comparison.
- TeMPOraL 3y agoAI gold rush is only just starting, though.
- SilasX 3y agoTheir competitors are only just starting too.
- bryanlarsen 3y agoI think P/S ratios are fairly comparable, though. Data going back that far is behind a paywall, so can't check.
- acchow 3y ago
- blantonl 3y agobut executives have no clue as to what they're doing or ought to be doing. But their marketing reports know EXACTLY what to do. Just add a blurb in any press release about "AI enabled x, y, z for our a, b, and c product lines" and the board and other execs are happy. Meanwhile 9 times out of 10 any feature that gets rolled out will be a collection of shell scripts that simply analyzes some data and spits out an answer, any answer, and "we AI enabled."
- jejeyyy77 3y agoI think you're being a bit patronizing here. It's lazy thinking to just assume everyone else is stupid except you ;) Transformers and diffusion models have already completely changed the game and the architectures are still very primitive. They will only get better from here. The crazy part is that for the foreseeable future, the limiting factor for improvement is compute. Train the models for more epochs is all that is needed, for now. Moores law seems to be coming back for another round.
- cs702 3y agoMy post was not meant to be patronizing. Sorry if it came across as such! I have no doubt that society will benefit from all that spending... but I'm much less certain about the fate of all the companies incurring all that spending!
- rafaelero 3y agoEven if 'regular' companies stopped demanding GPU's from NVIDIA, that demand would just transfer to cloud providers, which would keep buying those sweet H100. It's not a misguided AI strategy that is pumping the price. It's just a regular gold rush.
- cs702 3y agoI never said most companies are buying GPU's from Nvidia. What I said is that they're spending money, for a variety of AI and AI-related services provided by third parties. Those third parties, in turn, are buying GPU's.
- deleted 3y ago[deleted]
- swatcoder 3y agoThey didn't say anything like that. Anyone who's worked in tech for a few decades knows that what the OP describes happens regularly. There's nothing patronizing about sensing the pattern forming again here, and recognizing that the only sure thing is that the doe-eyed forty-niners racing to California all need pick axes and camp supplies and that the axemaker is going to get rich on their dreams no matter how things turn out. It doesn't suggest that there's no gold out that or that the game theory calculus that sends everybody chasing that gold is unsound. No individual is being called stupid. It just emphasises that a lot of people are going to make the wrong bets on AI, using more money than they really could afford to lose, and that NVidia is the only guaranteed (absurd) winner so far. There's nothing patronizing or even contentious to that.
- ryandvm 3y agoWhether an AI winter is coming or not, Nvidia is going to be selling a shitload of shovels for the next 10 years.
- NewJazz 3y agoEnough to justify a $2tn valuation?
- delecti 3y agoIf AI were just one thing, maybe not. But right now "AI" is LLMs, ML, the umbrella of "generative" (image, code, voice, video), and probably others I can't think of off the top of my head. I sure wouldn't bet on all of those fizzling out, and there are a lot of shovels to sell for each one of them.
- aurareturn 3y agoThey’re likely going well behind $2 trillion soon. The hype isn’t nearly done in my opinion.
- RandomLensman 3y agoThose non-tech executives often need to signal that they do something with AI in their firms - visibly ignoring it is generally not an option even if they believe that they could. They are not necessarily the patsies you make them out to be.
- cs702 3y agoTrue. In many cases they're acting like patsies... because they believe they have no other choice!
- narrator 3y agoAI, like the Internet will produce a good amount of economic value, so it's not something that will be a total waste. Sure, there will be a lot of waste, but quite a bit of productivity will come from it.
- GolfPopper 3y ago>The $2T question is: Is all this FOMO sustainable in the long run? How did it go with bitcoin and cryptocurrency in general? That seems the apt comparison.
- PathfinderBot 3y agoNot really, I think it's more apt to compare it to the dot-com bubble, given AI's obvious value to the average consumer.
- kjkjadksj 3y agoI have a little pet theory that due to the amount of compute we have today, wastes of resources like ai or blockchain or whatever comes next are a natural result of this overcapacity beyond most use cases. And businesses will always buy in to this spare capacity burn because it makes them appear innovative or productive. As a result the hardware manufacturers like NVDA will make out handsomely, swinging from vine to vine selling shovels and blue jeans to each new hype technology.
- laputan-machine 3y agoNvidia & cloud providers are the shovel sellers, seems to be working out quite well
- ashconnor 3y agoSo this is Yahoo with ad spending but with the added extra of hardware development that increases costs and reduces manoeuvrability?
- UncleOxidant 3y agoI saw an ad by some AI as a service (AaaS) company I'd never heard of on YouTube the other day. In the ad people were racing around trying to figure out an AI strategy - the solution? Just let us do it for you. There's so much money being thrown at anything with "AI" in it at this point - definitely FOMO fever. While I think Nvidia will do just fine (as the primary maker of picks in a gold rush) it seems like they're going to need to go after yet other markets - the trajectory so far has been gaming -> crypto -> AI. What's coming after that?
- cs702 3y agoLoL. I never thought someone would pay to create and show an ad acknowledging that almost no one in the corporate world has a clue about any of it! If you remember the name of the company that paid for that ad, please share it!
- datavirtue 3y agoYeah, being an AI provider is going to be a cost of doing business. Does your spreadsheet have an AI assistant built in? No? Then I'm switching to one that does. It is not going to be a differentiator. Every worker will need to be equipped with an AI assistant or the company is pedalling a bike on the freeway. AI is a tool, like a laptop. Does having a laptop make you special? Nope. But you MUST have it.
- al_borland 3y agoMy manager keeps asking, “can we add AI to this?” Not once has it made sense. I don’t think he has any idea what AI is, he just knows the CIO is GenAI crazy.