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$1T Rout Hits Nasdaq 100 over AI Jitters in Worst Day Since 2022
- prepend 2y agoAwesome, stocks are on sale today. That’s what Buffet always said [0]. [0] https://link.cnbc.com/public/29081083#:~:text=%22If%20they%20buy%20a%20stock,because%20we'll%20buy%20more https://link.cnbc.com/public/29081083#:~:text=%22If%20they%2....
- binkethy 2y agoExcept these might be long term duds. The latest AI bandwagons hype cycle invites silliness. One would be wise to look at the entity in questions overall health prior to announcing aome whole-hog AI effort. Due dilligence, etc
- madaxe_again 2y agoWell, that’s the thing. I keep seeing comparisons between Nvidia and Cisco - but they ring hollow. 1) Cisco had good hardware, but nothing that commodity gear couldn’t also do. Nvidia have a substantial moat. 2) Cisco had a p/e of 700! Nvidia is at 60. 3) Cisco had a decent order book during the boom, but nothing to justify their price. Nvidia’s order book is… unholy. I do think there’s a lot of hype around the various FOMO/ridealong stocks - but nvidia, I earnestly think remains undervalued.
- cm2187 2y agoWhat moat? I see people reimplementing open source models in a matter of weeks. These are not huge code bases. And when you want to run those models at scale, every cost saving will make big differences given their enormous computing requirements. It think it will become a cut-throat market.
- totallywrong 2y agoCUDA with all its developer mindshare.
- madaxe_again 2y agoAnd pre-booked fab capacity, which is the major bottleneck.
- cm2187 2y agoTraining those models costs 10s of millions. Running them at scale some order(s) of magnitude that. At one point those AI initiatives will need to return a profit. You really think developers will not have to learn a new API? Users inertia works for retail users, I don't think it works so much for people who get paid to do it or have a financial incentive to switch. Provided there is a suitable alternative.
- reaperman 2y agoNVidia doesn’t sell models so it doesn’t matter to them if individual models have moats.
- cm2187 2y agoIt's like saying that intel doesn't sell OS, so it doesn't matter to intel if windows is married to x86
- reaperman 2y agoWindows is also compiled for ARM and Microsoft literally sells their own Surface Pro computers with ARM processors[0]. So this is a terrible analogy, for a lot more reasons than that. Rather than go through all the reasons it’s a bad analogy I’ll just get straight to NVidia’s long term moat: NVidia has 6x the cash-on-hand (>$30B) than their closest competitor (AMD) ($5B), and all of that can go towards GPU R&D rather than being split between CPU+GPU R&D (AMD has 10% of the $65B GPU market share but 33% of the $50B CPU market share — their CPU business is almost 75% of their total business). If there are changes needed to stay competitive, NVidia has the warchest they need to adapt. Just their cash on hand would allow them to fumble an entire release cycle and still catch back up. Sure, if ROCm ever achieves parity with CUDA then Nvidia’s margins will finally decrease but the only way they’re facing any existential threat is by massively fumbling internally. If you have reason to believe that Nvidia will start executing poorly, then that would potentially be a valid concern — but so far they’re continuing to do great work despite their massive lead and their prices reflect their technical lead over their competitors. 0: https://www.theverge.com/2024/6/26/24186432/microsoft-windows-on-arm-qualcomm-copilot-plus-pcs-prism-emulator https://www.theverge.com/2024/6/26/24186432/microsoft-window...
- TheAlchemist 2y ago60 p/e ratio, means that you need 60 years of profits to get back the price you paid for the company. It's very very high, by historical standards. As the CEO from Sun Microsystems said after the bubble burst: "At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?" The number is more like 30 for Nvidia today...
- prepend 2y agoHigh P/Es are more of a projection of growth than an expectation of time to pay back. Also, McNealy’s comment isn’t quite applicable because stocks aren’t bonds. There’s an inherent value to the ongoing operation beyond just paying the earnings out.
- smolder 2y agoThe market can stay irrational longer than you can stay solvent, as they say. I have tried to make guesses that turned out to be right, with negative returns, because price was detached from value. I don't think that's how securities markets are meant to work or how they work optimally. I don't think the liquidity that pro-HFT people insist is so good means it's net positive. High frequency trading outfits, market manipulators, and trend chasers gain too much while more reasonable investors get sucked dry. A bunch of people have benefitted from predicting sentiment-based price and selling out of overinflated crap just in time. I believe the distortions that behavior creates are unhealthy for the overall economy and disincentivize smart investment, generally. We have investment based on hype and lies, and the outcome is that the actual labor the market implores is misdirected and falls short of its purpose of raising the net quality of life through real creation of value.
- prepend 2y agoIf you bet on the market and not individual stocks, you’ll fair better. Find any 10 year periods where the s&p had crappy returns. The market doesn’t stay irrational, but specific sections can.
- cm2187 2y agoAnd to stick to historical analogies, it's like saying "AOL and yahoo look cheap" sometime in 1999.
- prepend 2y agoThis is about the whole market, not individual stocks. This is Buffett’s point. When the market loses $1T in a day, it will definitely come back if you have a long term horizon. Just like if you bought nasdaq after the 2000 crash.
- coffeebeqn 2y agoYou’re just describing timing the market - which is not something Buffet would recommend to the active passive investor
- cm2187 2y agoRight, but even for the NASDAQ which took a real bath yesterday, it only went back to where it was a month ago. So it's not really a historical entry point opportunity. Maybe it's the start of a bear market. But if it's not, this sort of market corrections is not something a buy and hold investor should wait in cash to try to time. You typically lose more in market opportunity by waiting for a big selloff than going in early, taking the hit and coming back.
- prepend 2y agoBuffett wasn’t recommending market timing, he was just recommending feeling good about buying your stocks when they are lower in price.
- prepend 2y agoApple, Microsoft, and Nvidia may be long term duds? Certainly there are some, but the article talks about the Nasdaq100. The odds of all of them sucking and being down in a year are pretty slim.
- dash2 2y agoAnything is a dud if the price is high enough.
- rapsey 2y agoOne year is not long term. Nvidia is a pretty cyclical stock and most of their biggest customers are also actively trying to take their competitive advantage away. Actually long term they should not be worth more than Google.
- prepend 2y agoOne year is literally the term for long term capital gains. That being said, the period isn’t important. But that the big stocks will likely still be up in the long run.
- chii 2y agothe reason groceries put their produce on sale is because it's about to go bad.
- madaxe_again 2y agoBusinesses do not set their share price, the market does.
- chii 2y agothe seller does. And when the seller puts their stock on sale, it's because they believe the stock is going to go down (even more) in the future.
- rwmj 2y agoOr a bunch of other reasons: They are forced to sell to meet a margin call. They are irrationally fearful. They need to sell to afford their next yacht. They are rebalancing their portfolio.
- fullstackchris 2y agoboth buyers and sellers determine the price... thats kind of the definition of market
- blitzar 2y agoI have some pets.com I am happy to offer to you at a 90% discount from its all time high. Act fast, you don't want to miss out on a once in a lifetime opportunity.
- geor9e 2y ago" - Cisco investors in Fall 2000 https://i.imgur.com/gugqpH5.png https://i.imgur.com/gugqpH5.png
- red-iron-pine 2y agoyeah but that's not going to happen to me though
- uberdru 2y agoA whole generation of workers has never seen red numbers on their 401K statements.
- totallywrong 2y agoIt really was a matter of when. What real progress have we seen since people first experienced ChatGPT and the hype started? Investors have been very dumb throwing money on anything AI and they're starting to realize it.
- stubish 2y agoOr it was smart money and the drop from people locking in their massive profits?
- blitzar 2y agoThe smart money was short already.
- rapsey 2y agoIt is pretty much impossible for the investment cycle to be perfectly aligned with the value creation cycle. The dotcom bubble laid the foundations for the cloud and the modern internet. But keep in mind the valuations right now are nowhere close to the valuations in the dotcom bubble. Compared to back then we are not in a bubble at all or at just the beginnings of one.
- deleted 2y ago[deleted]
- altdataseller 2y agoWhere is the evidence behind this? Yes the Nasdaq sold off, but who said this is because of AI jitters? Who says it because investors are questioning whether AI is worth the hype? Did Bloomberg interview all these big investors who sold tech stocks today? … or are they just telling the narrative that will drive the most eyeballs? Because they can’t have a lame headline like “$1T wiped from Nasdaq because there were more sellers than buyers”??? I know its “bloomberg” but we can’t just blindly believe everything they tell us.
- LeonB 2y agoAt the end of every trading day, news reporters confidently state the reason behind whatever stock rose or fell that day. They must be very wise as they don’t seem to interview anyone before making these proclamations.
- blitzar 2y agoNews reporters don't write the narrative - it is traders, analysts and economists. "I did everything perfectly, but stuff outside my control blew up my otherwise winning trades - it would have been even worse if not for my quick thinking" is the correct answer for when your boss asks "Why did you lost $50million today?". It is what he told his boss back in the 00's when he was in your seat and it is what some junior will tell you in 20 years time when you are in the corner office.
- LeonB 2y agoPretty much any human presented with a tiny slither of information immediately asks for and or invents a “narrative” to “make sense” of what occurred. The less datapoints you have, the easier it is to make a line that fits. We’re great at pretending to understand, masters at nodding wisely.
- blitzar 2y ago> We’re great at pretending to understand, masters at nodding wisely. People have even convinced themselves that when they pretend to understand and nod along like a master that they themselves have obtained mastery level understanding of the subject.
- relistan 2y agoWho could have seen it coming?
- RandomThoughts3 2y agoTIL because all of the comments as I'm writing this one have once again been posted by people who didn't bother even skimming the article: - The selloff was triggered by a middle-of-the-road earnings report from Alphabet Inc. late Tuesday that featured a bloated capital expense. - The declines mostly affect companies strongly linked to the AI push: Nvidia, Microsoft, Apple but also Broadcom, Tesla, etc. - Some analysts lead by Goldman Sachs have been beating the AI bubble drum for a bit now while multiples remain very high.
- deleted 2y ago[deleted]
- vasco 2y ago> - The selloff was triggered by a middle-of-the-road earnings report from Alphabet Inc. late Tuesday that featured a bloated capital expense. Nobody knows what triggered the selloff, it's a global market with millions of actors doing actions based on numerous sources of information. More than that we come off a peak of hitting SPY500 ~$600 and NASDAQ100 at $20.5k which are all time highs and it's very normal to retrace a bit after - but even that doesn't mean much. Whenever someone tells you the reason for a stock market move, all they're telling you is what they believe did it, but they have no clue, other than specific critical situations as like, after 9/11 attacks. For company specific "this is why" it's much easier, but even then many times it does the opposite of what the analysts' previous explanation was. They just tell you something because they know people want a "reason". They could've easily written "after historic rise and new all time highs, some investors take profit" and it'd also be correct. It's like a bunch of guys looking at a CPU metric in grafana without SSH access to the server or knowing what it's running trying to figure out the cause. Sometimes it pins at 100% and some guy shouts "it's paging to disk", and yeah, might be, might also not.
- lifestyleguru 2y ago> questions swirled over just how long it will take for the substantial investments in the technology to pay off. > “The overarching concern is, where is the ROI on all the AI infrastructure spending?” I have an opinion which they wouldn't listen to anyways.