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Except 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

Except 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 ago
Well, 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 ago
  What 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 ago
    CUDA with all its developer mindshare.
    - madaxe_again 2y ago
      And pre-booked fab capacity, which is the major bottleneck.
    - cm2187 2y ago
      Training 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 ago
    NVidia doesn’t sell models so it doesn’t matter to them if individual models have moats.
    - cm2187 2y ago
      It's like saying that intel doesn't sell OS, so it doesn't matter to intel if windows is married to x86
      - reaperman 2y ago
        Windows 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...
        cm2187 2y ago
        On windows, you forget that it wasn't the case historically that windows could run on ARM, and it took years for MSFT to make it work (hence it was a real moat), and now that it works it is a real threat to Intel's grip on the PC market. So it exactly proves my point that you want to know how locked in your customers are to your product. And as Bezos says, your margin is my opportunity, and nvidia makes humongous margins right now. It will attract investments in competitors. And if a competing GPU is half as powerful but a third of the price, it will eat market shares and compress margins. Unless customers cannot switch, but I don't believe that to be the case.
- TheAlchemist 2y ago
  60 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 ago
    High 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 ago
The 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 ago
  If 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 ago
And to stick to historical analogies, it's like saying "AOL and yahoo look cheap" sometime in 1999.
- prepend 2y ago
  This 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 ago
    You’re just describing timing the market - which is not something Buffet would recommend to the active passive investor
  - cm2187 2y ago
    Right, 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 ago
      Buffett wasn’t recommending market timing, he was just recommending feeling good about buying your stocks when they are lower in price.
prepend 2y ago
Apple, 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 ago
  Anything is a dud if the price is high enough.
- rapsey 2y ago
  One 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 ago
    One 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.

madaxe_again 2y ago

Well, 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 ago
What 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 ago
  CUDA with all its developer mindshare.
  - madaxe_again 2y ago
    And pre-booked fab capacity, which is the major bottleneck.
  - cm2187 2y ago
    Training 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 ago
  NVidia doesn’t sell models so it doesn’t matter to them if individual models have moats.
  - cm2187 2y ago
    It's like saying that intel doesn't sell OS, so it doesn't matter to intel if windows is married to x86
    - reaperman 2y ago
      Windows 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...
      - cm2187 2y ago
        On windows, you forget that it wasn't the case historically that windows could run on ARM, and it took years for MSFT to make it work (hence it was a real moat), and now that it works it is a real threat to Intel's grip on the PC market. So it exactly proves my point that you want to know how locked in your customers are to your product. And as Bezos says, your margin is my opportunity, and nvidia makes humongous margins right now. It will attract investments in competitors. And if a competing GPU is half as powerful but a third of the price, it will eat market shares and compress margins. Unless customers cannot switch, but I don't believe that to be the case.
TheAlchemist 2y ago
60 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 ago
  High 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 ago

The 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 ago
If 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 ago

And to stick to historical analogies, it's like saying "AOL and yahoo look cheap" sometime in 1999.

prepend 2y ago
This 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 ago
  You’re just describing timing the market - which is not something Buffet would recommend to the active passive investor
- cm2187 2y ago
  Right, 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 ago
    Buffett wasn’t recommending market timing, he was just recommending feeling good about buying your stocks when they are lower in price.

prepend 2y ago

Apple, 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 ago
Anything is a dud if the price is high enough.
rapsey 2y ago
One 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 ago
  One 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.