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So you have a gold field. The miners are digging up the gold and selling it. Say they manage to sell $100 worth of gold. Meanwhile a guy sets up shop selling

• deelowe 2y ago
  All of the major cloud providers are building their own chips. Hell, Microsoft's hardware dev org pretty much all former intel employees.
  • jpgvm 2y ago
    Yeah so that is one of the possibilities, people start making their own shovels. There are a bunch of others: People start getting shovels from somewhere else even if they aren't quite as good (AMD). They realise there is actually only a small group of them buying literally all the shovels and they use that position to force more favourable pricing. Another company works out how to make a better shovel, or worse something that isn't even a shovel anymore and is much more efficient at mining. (These don't exist for training yet but there are inference chips that make NVidia look terrible in comparison) etc. The fact of the matter is that it's not a stable situation, something has to give. Hype can allow these sorts of massive imbalances to exist for short periods but there is always balance in the end.
• dabbz 2y ago
  I'd equate Nvidia to being the seller of materials needed to make a specific shovel shown to be very good at digging gold. Microsoft and their kiln are buying all the materials to make their own shovel shop. They're also buying their own shovels. But that's probably being too pedantic here.
• IncreasePosts 2y ago
  The problem with this analogy is the gold miners are not just trying to mine gold. They are simultaneously doing a bunch of other economic activities that generally make money, as well as trying to mine gold. Some are selling yearbooks back at camp, or putting on plays, or selling food, etc. nvidia can't make more money than the client companies make altogether, but they certainly can make more money than any(/all) of the client companies make using nvidia's products. It could be the case(and currently is the case) that other non-AI revenue streams are just being handed over to nvidia in the hopes the AI revenue streams take off eventually.
• jjmarr 2y ago
  The analogy assumes you already know where the gold is. Right now companies are spending a ton of money trying to find gold, and that costs capital. That's why they're slapping the word "AI" onto everything to see if it sticks. And re: > a toolmaker can't be making more money then the companies using those tools to make money. Every historical gold rush has had exactly that happen which is the point of the analogy. You have a bunch of broke pioneers, a few people that struck it rich on their stakes, and then a saloon owner that rakes in steady income from alcoholic prospectors.
  • jacobr1 2y ago
    > a toolmaker can't be making more money then the companies using those tools to make money. In the historical gold rush, you also had speculators funding prospectors. That might just be personal savings, friends and family or investors. Similar to the current AI rush, you have VCs and corporate profits from companies pivoting into AI that, theoretically, could all go bust. But there still is a whole lot of capital to expend even if the investments are never profitable.
• creer 2y ago
  Not quite how it works, even in your analogy. The miners are using capital to buy tools, not profits. They or may not make a profit but there is no way they will ever make a profit without first buying shovels. Buying shovels is not optional. Eventually something changes, yes - and eventually can be a very long time in finance. Often much longer than your useful investing outlook or patience.
  • jpgvm 2y ago
    I know. The idea was to make people think what happens after the rush but apparently that fell flat.