5 ms·

Tell me more about why you believe their stock is hilariously overvalued.

Takennickname 3y ago
Because he missed the train. My guess.
Workaccount2 3y ago
They are priced as if they are the only ones who are capable of creating chips that can crunch LLM algos. But AMD, Google, Intel, and even Apple are also capable. Apple is in talks with Google to bring Gemini to the iPhone, and it will obviously also be on android phones. So almost every phone on earth is poised to be using Gemini in the near future, and Gemini runs entirely on Google's own custom hardware (which is at parity or better than nVidia's offerings anyway).
- jerf 3y ago
  This seems as good a place as any to be Corrected by the Internet, so... correct me if I'm wrong. Making a graphics chip that is as good as Nvidia: Very difficult. Huge moat, huge effort, lots of barriers, lots of APIs, lot of experience, lots of decades of experience to overcome. Making something that can run a NN: Much, much easier. I'd guess, start-up level feasible. The math is much simpler. There's a lot of it, but my biggest concern would be less about pulling it off and more around whether my custom hardware is still the correct custom hardware by the time it is released. You'd think you could even eke out a bit of a performance advantage in not having all the other graphics stuff around. LLMs in their current state are characterized by vast swathes of input data and unbelievably repetitive number crunching, not complicated silicon architectures and decades-refined algorithms. (I mean, the algorithms are decades refined, but they're still simple as programs go.) I understand nVidia's graphics moat. I do not understand the moat implied by their stock valuation, that as you say, they are the only people who will ever be able to build AI hardware. That doesn't seem remotely true. So... correct me Internet. Explain why nVidia has persistent advantages in the specific field of neural nets that can not be overcome. I'm seriously listening, because I'm curious; this is a deliberate Cunningham's Law invocation, not me speaking from authority.
  - smallmancontrov 3y ago
    I agree with you, but let me devil's advocate. After 10 years of pretending to care about compute, AMD has filled the industry with burned-once experts who, when weighing nvidia against competitors, instinctively include "likely boondoggle" against every competitor's quote because they've seen it happen, possibly several times. Combine this with nvidia's deep experience and and huge rich-get-richer R&D budget keeping them always one or two architecture and software steps ahead, like it did in graphics, and their rich-get-richer TSMC budget buying them a step ahead in hardware, and you have a scenario where it continues makes sense to pay the green tax for the next generation or three. Red/blue/other rebels get zinged and join team "just pay the green tax." NV continues to dominate. Competitors go green with envy, as was fortold.
    - htrp 3y ago
      > burned-once experts More like burned 2x / 3x / 4x of this time it's different people. Looking at you Intel
    - jerf 3y ago
      It's true that nobody has beaten nVidia yet, and that is a valid data point I don't deny. But (as a reply to some other repliers as well), AMD was also chasing them on the entire graphics stack as well as compute. That is trying to cross the moat. Even reimplementing CUDA as a whole is trying to cross a moat, even a smaller one. But just implementing a chip that does AI, as it stands today, full stop, seems like it would be a lot easier. There's a lot of people doing it and I can't imagine they're all going to fail. I would consider by far the more likely scenario to be that the AI research community finds something other than neural nets to run on and thus the latest hotness becomes something other than a neural net and the chips become much less relevant or irrelevant. And with the valuation of nVidia basically being based not on their graphics, or CUDA, but specifically just on this one feeding frenzy of LLM-based AI, it seems to me there's a lot of people with the motivation to produce a chip that can do this.
  - bgnn 3y ago
    CUDA is/was their biggest advantage to be honest, not the HW. They saw the demand to super high-end GPUs driven by Bitcoin mining craze thanks to CUDA, and it transitioned gracefully to AI/ML workloads. Google was much more ahead to see the need and develop TPUs for example. I don't think they have a crazy advantage HW wise. Couple of start-ups are able to achieve this. If SW infrastracture end is standardized, we will have a more level playground.
- belter 3y ago
  Good luck with that. Gemini Advanced is simply unusable right now....It's so bad its hard to believe nobody picked up on that yet.
  - belter 3y ago
    Go to Gemini Advanced and try a common programming task in Parallel with Claude and ChatGPT4. Within 2 prompts Claude and ChatGPT4 will give nice working code you can use as a basis while Gemini Advanced will ignore your prompts, provide partial code and quickly tell you it can do more, until you tell it exactly what you want. It will go from looking usable to stuck on "I can do A or I can do B you tell me what you prefer hell" in less than 2 or 3 prompts...Unusable. And I say that as paying customer that will soon cancel the service.
    - Workaccount2 3y ago
      You're not wrong, but it wouldn't be surprising if Google irons things out with a few more updates. The point is that it would be foolish to write off Gemini right now, and Gemini is totally independent of Nvidia's dominance.
- drexlspivey 3y ago
  AMD is even more hilariously overvalued, currently at 360 PE
xyst 3y ago
Because their stock value is highly coupled with crypto mining and AI craze. The move from PoW to PoS for most crypto networks in combination with bust of ‘22. NVDA slid down in value. OpenAI debuts ChatGPT in late 2022 and now it’s suddenly bumping in price as the hype and rush for GPUs from companies of all types buys up their stock of GPUs. Demand is far outpacing the supply. Nvda can’t keep up. Thus, share price is brittle. Competition in the GPU market is dominantly owned by Nvidia. That can change, but so far openai loves using nvidia for some reason.
- ryandrake 3y ago
  If you are a true believer that AI is not a craze, then the stock can only go up from here. If you think there is a chance that everyone gets bored of AI and moves on to some other fad that is not in Nvidia’s wheelhouse, then it’s probably down from here. I’m staying out of this bet: don’t have the stomach for it.
  - AlexandrB 3y ago
    There's another case for pessimism as well: cost. It's possible that many AI applications aren't worth the money required for the extra compute. AI-enhanced search comes to mind here: how is Microsoft going to monetize users of Copilot in Bing to justify the extra cost? Right now a lot of this stuff is heavily subsidized by VCs or the MSFTs of the world, but when it comes time to make a profit we'll see what actually sticks around.
    - jacobr1 3y ago
      This seems true as far as incentives go. But how much of that cost driver will be due to efficiencies driven by companies like NVIDIA? They seem well poised to benefit from a lot of the increased (non-hype) use of AI. Seems like we spent a decade or more of stalled CPU performance gains chasing better energy efficiency in the data center, same story could play out here.
    - _factor 3y ago
      Better question: why does a simple search for “What color is a labrador retriever” require any compute time when the answer can be cached? This is a simple example, but 90% of my searches don’t require an llm to process a simple question.
swalsh 3y ago
72 P/E ratio while they have a mere monopoly on one the most valuable resource in the world. Competition WILL come. Maybe it's Groq, maybe AMD, maybe Cerebras. Maybe there's a stealth startup out there. Point is, they're going to be challenged soon.
- htrp 3y ago
  You and what fab? It's almost impossible to manufacture at scale with good yields and leading edge fabs are almost all bought out.
smallmancontrov 3y ago
No moat. Yes, CUDA, but CUDA is maaaaaybe a few tens of billion USD deep and a few (more) years wide. When the rest of the industry saw compute as a vanity market, that was sufficient. Now, it's a matter of time before margins go to, uhhh, less than 90%. Does that make shorting a good idea? I wouldn't count on it. The market can always remain irrational longer than you can remain solvent.
- cma 3y ago
  They also bought infiniband which has played a big role in being the best at clustering, though Google's TPU reconfigurable topology stuff seems really cool too. Tesla went after them with Dojo and has still ended up splurging on big H100 clusters.
- tiahura 3y ago
  And MS and everyone else have plenty of interest in helping AMD commodify CUDA compatibility.
  - stefan_ 3y ago
    It's so weird it's taking them so long, because as far as anyone can tell AMD is mostly competent enough to make GPUs within some percentage points of Nvidia, the "breadth of complexity" in what these things do at the end of the day is ... rather underwhelming, the software stack may appear to be changing all the time but is also distinctly JavaScript-frotend-esque... is there an insider that knows what the holdup is? Is AMD just averse to making a ton of money? At this point AMD investors should be rebelling, it's pissing money out there but they are not getting wet, and management might have doubled the stock price but that's little consolation if "order of magnitude" is what could have been.
    - sangnoir 3y ago
      > At this point AMD investors should be rebelling Looking at the chart for $AMD over the past 5 years gives plenty od reasons to be happy, and no reason to rebel. A rational AMD investor should not be Jonesing Nvidia's catching lightning in a bottle via crypto + AI. The Transformers paper was published a few months before AMD released Zen 1 chips - they did not have a lot of money for GPU R&D then. The timing of the LLM-craze was very fortuitous for Nvidia.
TheAlchemist 3y ago
Their market cap is 2.2T $. In the past year, they had a revenue of 60B $ and net income of 30B $. Absolutely amazing numbers, I agree. The year before they had a revenue of 30B $ and a net income of 4.5B $ - and it was a rather good year. What happens next of course depend of how you judge the situation - was it a peak hype demand ? Will it stabilize now ? Grow at current extraordinary rates ? Scenario 1 - margins get back to normal due to hype going down, competition improving etc - in this case the company is worth at best ~200B $ - or 1/10 of what it is now. Scenario 2 - they maintain current revenue and the exceptional margins - the company would be worth ~1T - or 1/2 of what it is now. Scenario 3 - they current growth rate (based on past 12 months) continue for ~5 years. This is the case the company is worth ~2T $. But they are in a business where most money come from a handful of customers, all of which are working on similar chips - and given the sums in play now, the incentives are *very* strong. My opinion, is that the company is already priced for perfection - basically the current price reflects the perfect scenario. I struggle to see any upside, unless we have AGI in the next 5 years and it decides it can only run on Nvidia chips. All of this is akin to Tesla in the past years. They grew from a small startup to a medium car maker - the % growth rate was huge of course - an amazing achievement in itself. But people projected that the % growth rate would continue - and the stock was priced accordingly. Reality is catching up on Tesla, even if some projections are still absolutely crazy.
- CamperBob2 3y ago
  It does no good to design similar or even superior chips if you can't get them fabbed. How much of the world's fab capacity has Nvidia already reserved?

Because he missed the train. My guess.

They are priced as if they are the only ones who are capable of creating chips that can crunch LLM algos. But AMD, Google, Intel, and even Apple are also capable. Apple is in talks with Google to bring Gemini to the iPhone, and it will obviously also be on android phones. So almost every phone on earth is poised to be using Gemini in the near future, and Gemini runs entirely on Google's own custom hardware (which is at parity or better than nVidia's offerings anyway).

jerf 3y ago
This seems as good a place as any to be Corrected by the Internet, so... correct me if I'm wrong. Making a graphics chip that is as good as Nvidia: Very difficult. Huge moat, huge effort, lots of barriers, lots of APIs, lot of experience, lots of decades of experience to overcome. Making something that can run a NN: Much, much easier. I'd guess, start-up level feasible. The math is much simpler. There's a lot of it, but my biggest concern would be less about pulling it off and more around whether my custom hardware is still the correct custom hardware by the time it is released. You'd think you could even eke out a bit of a performance advantage in not having all the other graphics stuff around. LLMs in their current state are characterized by vast swathes of input data and unbelievably repetitive number crunching, not complicated silicon architectures and decades-refined algorithms. (I mean, the algorithms are decades refined, but they're still simple as programs go.) I understand nVidia's graphics moat. I do not understand the moat implied by their stock valuation, that as you say, they are the only people who will ever be able to build AI hardware. That doesn't seem remotely true. So... correct me Internet. Explain why nVidia has persistent advantages in the specific field of neural nets that can not be overcome. I'm seriously listening, because I'm curious; this is a deliberate Cunningham's Law invocation, not me speaking from authority.
- smallmancontrov 3y ago
  I agree with you, but let me devil's advocate. After 10 years of pretending to care about compute, AMD has filled the industry with burned-once experts who, when weighing nvidia against competitors, instinctively include "likely boondoggle" against every competitor's quote because they've seen it happen, possibly several times. Combine this with nvidia's deep experience and and huge rich-get-richer R&D budget keeping them always one or two architecture and software steps ahead, like it did in graphics, and their rich-get-richer TSMC budget buying them a step ahead in hardware, and you have a scenario where it continues makes sense to pay the green tax for the next generation or three. Red/blue/other rebels get zinged and join team "just pay the green tax." NV continues to dominate. Competitors go green with envy, as was fortold.
  - htrp 3y ago
    > burned-once experts More like burned 2x / 3x / 4x of this time it's different people. Looking at you Intel
  - jerf 3y ago
    It's true that nobody has beaten nVidia yet, and that is a valid data point I don't deny. But (as a reply to some other repliers as well), AMD was also chasing them on the entire graphics stack as well as compute. That is trying to cross the moat. Even reimplementing CUDA as a whole is trying to cross a moat, even a smaller one. But just implementing a chip that does AI, as it stands today, full stop, seems like it would be a lot easier. There's a lot of people doing it and I can't imagine they're all going to fail. I would consider by far the more likely scenario to be that the AI research community finds something other than neural nets to run on and thus the latest hotness becomes something other than a neural net and the chips become much less relevant or irrelevant. And with the valuation of nVidia basically being based not on their graphics, or CUDA, but specifically just on this one feeding frenzy of LLM-based AI, it seems to me there's a lot of people with the motivation to produce a chip that can do this.
- bgnn 3y ago
  CUDA is/was their biggest advantage to be honest, not the HW. They saw the demand to super high-end GPUs driven by Bitcoin mining craze thanks to CUDA, and it transitioned gracefully to AI/ML workloads. Google was much more ahead to see the need and develop TPUs for example. I don't think they have a crazy advantage HW wise. Couple of start-ups are able to achieve this. If SW infrastracture end is standardized, we will have a more level playground.
belter 3y ago
Good luck with that. Gemini Advanced is simply unusable right now....It's so bad its hard to believe nobody picked up on that yet.
- belter 3y ago
  Go to Gemini Advanced and try a common programming task in Parallel with Claude and ChatGPT4. Within 2 prompts Claude and ChatGPT4 will give nice working code you can use as a basis while Gemini Advanced will ignore your prompts, provide partial code and quickly tell you it can do more, until you tell it exactly what you want. It will go from looking usable to stuck on "I can do A or I can do B you tell me what you prefer hell" in less than 2 or 3 prompts...Unusable. And I say that as paying customer that will soon cancel the service.
  - Workaccount2 3y ago
    You're not wrong, but it wouldn't be surprising if Google irons things out with a few more updates. The point is that it would be foolish to write off Gemini right now, and Gemini is totally independent of Nvidia's dominance.
drexlspivey 3y ago
AMD is even more hilariously overvalued, currently at 360 PE

xyst 3y ago

Because their stock value is highly coupled with crypto mining and AI craze. The move from PoW to PoS for most crypto networks in combination with bust of ‘22. NVDA slid down in value. OpenAI debuts ChatGPT in late 2022 and now it’s suddenly bumping in price as the hype and rush for GPUs from companies of all types buys up their stock of GPUs. Demand is far outpacing the supply. Nvda can’t keep up. Thus, share price is brittle. Competition in the GPU market is dominantly owned by Nvidia. That can change, but so far openai loves using nvidia for some reason.

ryandrake 3y ago
If you are a true believer that AI is not a craze, then the stock can only go up from here. If you think there is a chance that everyone gets bored of AI and moves on to some other fad that is not in Nvidia’s wheelhouse, then it’s probably down from here. I’m staying out of this bet: don’t have the stomach for it.
- AlexandrB 3y ago
  There's another case for pessimism as well: cost. It's possible that many AI applications aren't worth the money required for the extra compute. AI-enhanced search comes to mind here: how is Microsoft going to monetize users of Copilot in Bing to justify the extra cost? Right now a lot of this stuff is heavily subsidized by VCs or the MSFTs of the world, but when it comes time to make a profit we'll see what actually sticks around.
  - jacobr1 3y ago
    This seems true as far as incentives go. But how much of that cost driver will be due to efficiencies driven by companies like NVIDIA? They seem well poised to benefit from a lot of the increased (non-hype) use of AI. Seems like we spent a decade or more of stalled CPU performance gains chasing better energy efficiency in the data center, same story could play out here.
  - _factor 3y ago
    Better question: why does a simple search for “What color is a labrador retriever” require any compute time when the answer can be cached? This is a simple example, but 90% of my searches don’t require an llm to process a simple question.

swalsh 3y ago

72 P/E ratio while they have a mere monopoly on one the most valuable resource in the world. Competition WILL come. Maybe it's Groq, maybe AMD, maybe Cerebras. Maybe there's a stealth startup out there. Point is, they're going to be challenged soon.

htrp 3y ago
You and what fab? It's almost impossible to manufacture at scale with good yields and leading edge fabs are almost all bought out.

smallmancontrov 3y ago

No moat. Yes, CUDA, but CUDA is maaaaaybe a few tens of billion USD deep and a few (more) years wide. When the rest of the industry saw compute as a vanity market, that was sufficient. Now, it's a matter of time before margins go to, uhhh, less than 90%. Does that make shorting a good idea? I wouldn't count on it. The market can always remain irrational longer than you can remain solvent.

cma 3y ago
They also bought infiniband which has played a big role in being the best at clustering, though Google's TPU reconfigurable topology stuff seems really cool too. Tesla went after them with Dojo and has still ended up splurging on big H100 clusters.
tiahura 3y ago
And MS and everyone else have plenty of interest in helping AMD commodify CUDA compatibility.
- stefan_ 3y ago
  It's so weird it's taking them so long, because as far as anyone can tell AMD is mostly competent enough to make GPUs within some percentage points of Nvidia, the "breadth of complexity" in what these things do at the end of the day is ... rather underwhelming, the software stack may appear to be changing all the time but is also distinctly JavaScript-frotend-esque... is there an insider that knows what the holdup is? Is AMD just averse to making a ton of money? At this point AMD investors should be rebelling, it's pissing money out there but they are not getting wet, and management might have doubled the stock price but that's little consolation if "order of magnitude" is what could have been.
  - sangnoir 3y ago
    > At this point AMD investors should be rebelling Looking at the chart for $AMD over the past 5 years gives plenty od reasons to be happy, and no reason to rebel. A rational AMD investor should not be Jonesing Nvidia's catching lightning in a bottle via crypto + AI. The Transformers paper was published a few months before AMD released Zen 1 chips - they did not have a lot of money for GPU R&D then. The timing of the LLM-craze was very fortuitous for Nvidia.

TheAlchemist 3y ago

Their market cap is 2.2T $. In the past year, they had a revenue of 60B $ and net income of 30B $. Absolutely amazing numbers, I agree. The year before they had a revenue of 30B $ and a net income of 4.5B $ - and it was a rather good year. What happens next of course depend of how you judge the situation - was it a peak hype demand ? Will it stabilize now ? Grow at current extraordinary rates ? Scenario 1 - margins get back to normal due to hype going down, competition improving etc - in this case the company is worth at best ~200B $ - or 1/10 of what it is now. Scenario 2 - they maintain current revenue and the exceptional margins - the company would be worth ~1T - or 1/2 of what it is now. Scenario 3 - they current growth rate (based on past 12 months) continue for ~5 years. This is the case the company is worth ~2T $. But they are in a business where most money come from a handful of customers, all of which are working on similar chips - and given the sums in play now, the incentives are *very* strong. My opinion, is that the company is already priced for perfection - basically the current price reflects the perfect scenario. I struggle to see any upside, unless we have AGI in the next 5 years and it decides it can only run on Nvidia chips. All of this is akin to Tesla in the past years. They grew from a small startup to a medium car maker - the % growth rate was huge of course - an amazing achievement in itself. But people projected that the % growth rate would continue - and the stock was priced accordingly. Reality is catching up on Tesla, even if some projections are still absolutely crazy.

CamperBob2 3y ago
It does no good to design similar or even superior chips if you can't get them fabbed. How much of the world's fab capacity has Nvidia already reserved?