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Meta is wasting all kind of money ($40B across 2 years) on Nvidia, SMCI, and their own gear. SMCI and Nvidia stocks are now overvalued because there are no fund

Meta is wasting all kind of money ($40B across 2 years) on Nvidia, SMCI, and their own gear. SMCI and Nvidia stocks are now overvalued because there are no fundamentals to sustain this business. OpenAI/Microsoft may be an exception, but Meta is wasting money it doesn't have on profits that aren't there. These data centers and servers are being built on orders of Zuck without a concrete, specific product or purpose for their use. This is akin to a newbie business owner buying lots of inventory without orders.

fragmede 3y ago
you know the saying; the market can stay irrational longer than you can stay solvent and all that. turns out P/E ratios determine a theoretical floor for the price, but as we've seen with Tsla and crypto, this shits all vibes anyway. AI isn't slowing down, or going to go anywhere, so these stocks, overvalued though you might see them, aren't going to go down anytime soon, in my opinion, so while what your say is true, NVDA and smci are safe to hold. the real question is what's going on with tsmc and mu, given their proximity to NVDA, and their lack of a pop.
- solumunus 3y ago
  Currently TSM isn’t guiding much growth, I would guess we see an uptick in guidance in their next earnings report.
  - _zoltan_ 3y ago
    they report earnings monthly.
    - solumunus 3y ago
      They report some things monthly and they do a full earnings report quarterly.
- epolanski 3y ago
  It's interesting you mention Tesla, because their sales clearly show that the growth expectation was not realistic. And in case of Nvidia it's even much worse. In order for Nvidia to be worth a decent premium over the yield of some index fund like VOO (you're taking much more risk), it has to grow in the order of 42% per year for a decade in revenue. There's no such amounts of money to be spent in hardware, it's lunacy. Not even the other tech giants combined have even a small part of the money required for such growth. And on top of that, this is a very dynamic sector where any competitor, technological breakthrough can make you the new IBM. Prices like Nvidia were highly overvalued but understandable with a stretch of imagination of 25% growth for a decade when it was 300$. I could almost see it and would've still concluded it was an unlikely outcome and risk/reward ratio was not there. But now we long past that mark and in the territory of insane expectations and high premiums paid with a very high risk.
  - mschuster91 3y ago
    > There's no such amounts of money to be spent in hardware, it's lunacy. Oh, money there is. NVIDIA is selling shovels to hordes of people searching for gold... first it was cr*ptoc*in miners, now it's billion dollar companies in the search for AGI. But unlike shovels that anyone with access to iron, a fire and a hammer can make, there are only five companies on this planet that can design the chips in the first place: Google and Amazon (who don't sell to outsiders), Intel (who has other, more pressing issues than to design AI training accelerators), AMD (who has the chops on the hardware design side but seems to be completely unable to get the software side stable enough that people would be even willing to look at it) and NVIDIA. And to make the issue worse, there are only three fab houses who can physically manufacture the chips: TSMC, Samsung and Intel... TSMC is all but booked out already, Samsung is nowhere near their level, and Intel both doesn't do fab jobs for outsiders and has completely botched their new nodes for years now. There is just no way anyone can outsmart NVIDIA at that point, and demand is only going to increase in pretty nasty bidding wars.
    - epolanski 3y ago
      None of what you said denies any of my conclusions: expecting Nvidia to grow at a 40%+ rate for a decade is ludicrous. Any of your arguments has been done about leaders like Cisco, Intel or Tesla that balooned to valuations that did not meet reality regardless of those companies in fact doing well, the revenue and growth expectations were just asinine and void of basic math. There's no such thing as infinite demand growth and infinitely deep pockets, let alone margins staying that good for so long (and again the aforementioned companies are examples of the phenomenon). You will likely do much better investing in VOO today than buying Nvidia, let alone having a much better risk/reward ratio.
caslon 3y ago
Meta obviously has the money; $135B revenue, $88B in expenses, $18B in debt. Even assuming the current push toward general AI is a bubble, which is not unreasonable, the company can afford to throw away billions of dollars. It doesn't matter at all; they own the money printer and can make as many bets in as many markets as they want. The same GPUs that are presently being used to create semi-open AI projects can just as easily be repurposed to power a public launch of their Codec avatars, which are lightyears ahead of what Apple has, or for better prediction engines in what are quite probably the best sales engines of all time: Their websites. Their data centers will be useful for the future of selling products to gullible consumers: Short-form video, which is the first chance in years that they've had to meaningfully take market share from Google. Even assuming it was all vanity, Zuckerberg has earned the right at this stage in his career to make vanity plays. He still has majority control over his company, which shareholders have insisted upon, and he has an almost untarnished record of making incredible long-term bets that seem irrational at the time (Instagram acquisition, Whatsapp acquisition, arguably the Oculus acquisition). He's earned drastic amounts of money for speculators, who have done little to deserve any of it. It would be a strange thing to argue that the speculators suddenly have a better grasp of what he's doing than he does; there are millions of speculators, but only one person with a track record like Zuckerberg.
- red-iron-pine 3y ago
  > almost untarnished record of making incredible long-term bets that seem irrational at the time (Instagram acquisition, Whatsapp acquisition, arguably the Oculus acquisition). how's the metaverse going?
  - caslon 3y ago
    Pretty well, actually; Quest has outpaced this generation's Xbox.
matwood 3y ago
Meta has plenty of money to spend. It's also been reported that Meta is using AI to get around Apple's ATT [1], with some reports saying that user ad targeting is better than before ATT came out [2]. Meta is already executing and succeeding on a concrete plan using their AI. [1] https://www.forbes.com/sites/jonmarkman/2023/05/24/metas-ai-breakthrough-defying-user-tracking-policies-billions-await/?sh=662e7eb7aa77 https://www.forbes.com/sites/jonmarkman/2023/05/24/metas-ai-... [2] https://www.socialmediatoday.com/news/meta-outlines-evolving-ai-ad-targeting-process-improving-ad-/650225/ https://www.socialmediatoday.com/news/meta-outlines-evolving...

fragmede 3y ago

you know the saying; the market can stay irrational longer than you can stay solvent and all that. turns out P/E ratios determine a theoretical floor for the price, but as we've seen with Tsla and crypto, this shits all vibes anyway. AI isn't slowing down, or going to go anywhere, so these stocks, overvalued though you might see them, aren't going to go down anytime soon, in my opinion, so while what your say is true, NVDA and smci are safe to hold. the real question is what's going on with tsmc and mu, given their proximity to NVDA, and their lack of a pop.

solumunus 3y ago
Currently TSM isn’t guiding much growth, I would guess we see an uptick in guidance in their next earnings report.
- _zoltan_ 3y ago
  they report earnings monthly.
  - solumunus 3y ago
    They report some things monthly and they do a full earnings report quarterly.
epolanski 3y ago
It's interesting you mention Tesla, because their sales clearly show that the growth expectation was not realistic. And in case of Nvidia it's even much worse. In order for Nvidia to be worth a decent premium over the yield of some index fund like VOO (you're taking much more risk), it has to grow in the order of 42% per year for a decade in revenue. There's no such amounts of money to be spent in hardware, it's lunacy. Not even the other tech giants combined have even a small part of the money required for such growth. And on top of that, this is a very dynamic sector where any competitor, technological breakthrough can make you the new IBM. Prices like Nvidia were highly overvalued but understandable with a stretch of imagination of 25% growth for a decade when it was 300$. I could almost see it and would've still concluded it was an unlikely outcome and risk/reward ratio was not there. But now we long past that mark and in the territory of insane expectations and high premiums paid with a very high risk.
- mschuster91 3y ago
  > There's no such amounts of money to be spent in hardware, it's lunacy. Oh, money there is. NVIDIA is selling shovels to hordes of people searching for gold... first it was cr*ptoc*in miners, now it's billion dollar companies in the search for AGI. But unlike shovels that anyone with access to iron, a fire and a hammer can make, there are only five companies on this planet that can design the chips in the first place: Google and Amazon (who don't sell to outsiders), Intel (who has other, more pressing issues than to design AI training accelerators), AMD (who has the chops on the hardware design side but seems to be completely unable to get the software side stable enough that people would be even willing to look at it) and NVIDIA. And to make the issue worse, there are only three fab houses who can physically manufacture the chips: TSMC, Samsung and Intel... TSMC is all but booked out already, Samsung is nowhere near their level, and Intel both doesn't do fab jobs for outsiders and has completely botched their new nodes for years now. There is just no way anyone can outsmart NVIDIA at that point, and demand is only going to increase in pretty nasty bidding wars.
  - epolanski 3y ago
    None of what you said denies any of my conclusions: expecting Nvidia to grow at a 40%+ rate for a decade is ludicrous. Any of your arguments has been done about leaders like Cisco, Intel or Tesla that balooned to valuations that did not meet reality regardless of those companies in fact doing well, the revenue and growth expectations were just asinine and void of basic math. There's no such thing as infinite demand growth and infinitely deep pockets, let alone margins staying that good for so long (and again the aforementioned companies are examples of the phenomenon). You will likely do much better investing in VOO today than buying Nvidia, let alone having a much better risk/reward ratio.

caslon 3y ago

Meta obviously has the money; $135B revenue, $88B in expenses, $18B in debt. Even assuming the current push toward general AI is a bubble, which is not unreasonable, the company can afford to throw away billions of dollars. It doesn't matter at all; they own the money printer and can make as many bets in as many markets as they want. The same GPUs that are presently being used to create semi-open AI projects can just as easily be repurposed to power a public launch of their Codec avatars, which are lightyears ahead of what Apple has, or for better prediction engines in what are quite probably the best sales engines of all time: Their websites. Their data centers will be useful for the future of selling products to gullible consumers: Short-form video, which is the first chance in years that they've had to meaningfully take market share from Google. Even assuming it was all vanity, Zuckerberg has earned the right at this stage in his career to make vanity plays. He still has majority control over his company, which shareholders have insisted upon, and he has an almost untarnished record of making incredible long-term bets that seem irrational at the time (Instagram acquisition, Whatsapp acquisition, arguably the Oculus acquisition). He's earned drastic amounts of money for speculators, who have done little to deserve any of it. It would be a strange thing to argue that the speculators suddenly have a better grasp of what he's doing than he does; there are millions of speculators, but only one person with a track record like Zuckerberg.

red-iron-pine 3y ago
> almost untarnished record of making incredible long-term bets that seem irrational at the time (Instagram acquisition, Whatsapp acquisition, arguably the Oculus acquisition). how's the metaverse going?
- caslon 3y ago
  Pretty well, actually; Quest has outpaced this generation's Xbox.

matwood 3y ago

Meta has plenty of money to spend. It's also been reported that Meta is using AI to get around Apple's ATT [1], with some reports saying that user ad targeting is better than before ATT came out [2]. Meta is already executing and succeeding on a concrete plan using their AI. [1] https://www.forbes.com/sites/jonmarkman/2023/05/24/metas-ai-breakthrough-defying-user-tracking-policies-billions-await/?sh=662e7eb7aa77 https://www.forbes.com/sites/jonmarkman/2023/05/24/metas-ai-... [2] https://www.socialmediatoday.com/news/meta-outlines-evolving-ai-ad-targeting-process-improving-ad-/650225/ https://www.socialmediatoday.com/news/meta-outlines-evolving...