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Nvidia's $30,000 is a 90% margin product at scale. They could charge 1/3 that and still be very profitable. There has rarely been such a profitable large corpor

Nvidia's $30,000 is a 90% margin product at scale. They could charge 1/3 that and still be very profitable. There has rarely been such a profitable large corporation in terms of the combo of profit & margin. Their last quarter was $35b in sales and $26b in gross profit ($21.8b op income; 62% op income margin vs sales). Visa is notorious for their extreme margin (66% op income margin vs sales) due to being basically a brand + transaction network. So the fact that a hardware manufacturer is hitting those levels is truly remarkable. It's very clear that either AMD or Intel could accept far lower margins to go after them. And indeed that's exactly what will be required for any serious attempt to cut into their monopoly position.

talldayo 2y ago
> And indeed that's exactly what will be required for any serious attempt to cut into their monopoly position. You misunderstand why and how Nvidia is a monopoly. Many companies make GPUs, and all those GPUs can be used for computation if you develop compute shaders for them. This part is not the problem, you can already go buy cheaper hardware that outperforms Nvidia if price is your only concern. Software is the issue. That's it - it's CUDA and nothing else. You cannot assail Nvidia's position, and moreover their hardware's value, without a really solid reason for datacenters to own them. Datacenters do not want to own GPUs because once the AI bubble pops they'll be bagholders for Intel and AMD's depreciated software. Nvidia hardware can at least crypto mine, or be leased out to industrial customers that have their own remote CUDA applications. The demand for generic GPU compute is basically nonexistent, the reason this market exists at all is because CUDA exists, and you cannot turn over Nvidia's foothold without accepting that fact. The only way the entire industry can fuck over Nvidia is if they choose to invest in a complete CUDA replacement like OpenCL. That is the only way that Nvidia's value can be actually deposed without any path of recourse for their business, and it will never happen because every single one of Nvidia's competitors hate each other's guts and would rather watch each other die in gladiatorial combat than help each other fight the monster. And Jensen Huang probably revels in it, CUDA is a hedged bet against the industry ever working together for common good.
- adventured 2y ago
  I do not misunderstand why Nvidia has a monopoly. You jumped drastically beyond anything I was discussing and incorrectly assumed ignorance on my part. I never said why I thought they had one. I never brought up matters of performance or software or moats at all. I matter of fact stated they had a monopoly, you assumed the rest. It's impossible to assail their monopoly without utilizing far lower prices, coming up under their extreme margin products. It's how it is almost always done competitively in tech (see: ARM, or Office (dramatically undercut Lotus with a cheaper inferior product), or Linux, or Huawei, or Chromebooks, or Internet Explorer, or just about anything). Note: I never said lower prices is all you'd need. Who would think that? The implication is that I'm ignorant of the entire history of tech, it's a poor approach to discussion with another person on HN frankly.
  - talldayo 2y ago
    Nvidia's monopoly is pretty much detached from price at this point. That's the entire reason why they can charge insane margins - nobody cares! There is not a single business squaring Nvidia up with serious intent to take down CUDA. It's been this way for nearly two decades at this point, with not a single spark of hope to show for it. In the case of ARM, Office, Linux, Huawei, and ChromeOS, these were all actual alternatives to the incumbent tools people were familiar with. You can directly compare Office and Lotus because they are fundamentally similar products - ARM had a real chance against x86 because wasn't a complex ISA to unseat. Nvidia is not analogous to these businesses because they occupy a league of their own as the provider of CUDA. It's not exaggeration to say that they have completely seceded from the market of GPUs and can sustain themselves on demand from crypto miners and AI pundits alone. AMD, Intel and even Apple have bigger things to worry about than hitting an arbitrary price point, if they want Nvidia in their crosshairs. All of them have already solved the "sell consumer tech at attractive prices" problem but not the "make it complex, standardize it and scale it up" problem.
    - ryao 2y ago
      It is cheaper to pay Nvidia than it is to roll your own solution and no one else is competitive. That is the reason Nvidia can charge so much per card.
Der_Einzige 2y ago
Thank you for laying it out. It's so silly to see people in the comments act like Intel or Nvidia can't EASILY add more VRAM to their cards. Every single argument against it is all hogwash.
arcticbull 2y ago
Visa doesn't actually make a ton of money off each transaction, if you divide out their revenue against their payment volume (napkin math)... They processed $12T in payments last year (almost a billion payments per day), with a net revenue of $32B. That's a gross transaction margin of 0.26% and their GAAP net income was half that, about 0.14%. [1] They're just a transaction network, unlike say Amex which is both an issuer and a network. Being just the network is more operationally efficient. [1] https://annualreport.visa.com/financials/default.aspx https://annualreport.visa.com/financials/default.aspx
- oivey 2y ago
  That’s a weird way to account for their business size. There isn’t a significant marginal cost per transaction. They didn’t sell $12T in products. They facilitated that much in payments. Their profits are fantastic.
- imtringued 2y ago
  If you have no clue how profit margins are calculated then you're better off staying quiet. It's quite simple. Divide revenue minus costs by revenue. Transaction volume isn't revenue. Visa only gets the transaction fee. Even if I give you the benefit of the doubt and do a proper interpretation of the number you've arrived at, its meaning is quite different and quite off topic from this discussion. What you have calculated is the total share of costs that Visa represents in that 12 trillion dollar part of the economy. It is like saying Visa's share of GDP is 0.1%.
  - arcticbull 2y ago
    I didn't say that was their profit margin, that's their transaction margin. As my mother used to say if you have nothing nice to say you're better off staying quiet ;)

talldayo 2y ago

> And indeed that's exactly what will be required for any serious attempt to cut into their monopoly position. You misunderstand why and how Nvidia is a monopoly. Many companies make GPUs, and all those GPUs can be used for computation if you develop compute shaders for them. This part is not the problem, you can already go buy cheaper hardware that outperforms Nvidia if price is your only concern. Software is the issue. That's it - it's CUDA and nothing else. You cannot assail Nvidia's position, and moreover their hardware's value, without a really solid reason for datacenters to own them. Datacenters do not want to own GPUs because once the AI bubble pops they'll be bagholders for Intel and AMD's depreciated software. Nvidia hardware can at least crypto mine, or be leased out to industrial customers that have their own remote CUDA applications. The demand for generic GPU compute is basically nonexistent, the reason this market exists at all is because CUDA exists, and you cannot turn over Nvidia's foothold without accepting that fact. The only way the entire industry can fuck over Nvidia is if they choose to invest in a complete CUDA replacement like OpenCL. That is the only way that Nvidia's value can be actually deposed without any path of recourse for their business, and it will never happen because every single one of Nvidia's competitors hate each other's guts and would rather watch each other die in gladiatorial combat than help each other fight the monster. And Jensen Huang probably revels in it, CUDA is a hedged bet against the industry ever working together for common good.

adventured 2y ago
I do not misunderstand why Nvidia has a monopoly. You jumped drastically beyond anything I was discussing and incorrectly assumed ignorance on my part. I never said why I thought they had one. I never brought up matters of performance or software or moats at all. I matter of fact stated they had a monopoly, you assumed the rest. It's impossible to assail their monopoly without utilizing far lower prices, coming up under their extreme margin products. It's how it is almost always done competitively in tech (see: ARM, or Office (dramatically undercut Lotus with a cheaper inferior product), or Linux, or Huawei, or Chromebooks, or Internet Explorer, or just about anything). Note: I never said lower prices is all you'd need. Who would think that? The implication is that I'm ignorant of the entire history of tech, it's a poor approach to discussion with another person on HN frankly.
- talldayo 2y ago
  Nvidia's monopoly is pretty much detached from price at this point. That's the entire reason why they can charge insane margins - nobody cares! There is not a single business squaring Nvidia up with serious intent to take down CUDA. It's been this way for nearly two decades at this point, with not a single spark of hope to show for it. In the case of ARM, Office, Linux, Huawei, and ChromeOS, these were all actual alternatives to the incumbent tools people were familiar with. You can directly compare Office and Lotus because they are fundamentally similar products - ARM had a real chance against x86 because wasn't a complex ISA to unseat. Nvidia is not analogous to these businesses because they occupy a league of their own as the provider of CUDA. It's not exaggeration to say that they have completely seceded from the market of GPUs and can sustain themselves on demand from crypto miners and AI pundits alone. AMD, Intel and even Apple have bigger things to worry about than hitting an arbitrary price point, if they want Nvidia in their crosshairs. All of them have already solved the "sell consumer tech at attractive prices" problem but not the "make it complex, standardize it and scale it up" problem.
  - ryao 2y ago
    It is cheaper to pay Nvidia than it is to roll your own solution and no one else is competitive. That is the reason Nvidia can charge so much per card.

Der_Einzige 2y ago

Thank you for laying it out. It's so silly to see people in the comments act like Intel or Nvidia can't EASILY add more VRAM to their cards. Every single argument against it is all hogwash.

arcticbull 2y ago

Visa doesn't actually make a ton of money off each transaction, if you divide out their revenue against their payment volume (napkin math)... They processed $12T in payments last year (almost a billion payments per day), with a net revenue of $32B. That's a gross transaction margin of 0.26% and their GAAP net income was half that, about 0.14%. [1] They're just a transaction network, unlike say Amex which is both an issuer and a network. Being just the network is more operationally efficient. [1] https://annualreport.visa.com/financials/default.aspx https://annualreport.visa.com/financials/default.aspx

oivey 2y ago
That’s a weird way to account for their business size. There isn’t a significant marginal cost per transaction. They didn’t sell $12T in products. They facilitated that much in payments. Their profits are fantastic.
imtringued 2y ago
If you have no clue how profit margins are calculated then you're better off staying quiet. It's quite simple. Divide revenue minus costs by revenue. Transaction volume isn't revenue. Visa only gets the transaction fee. Even if I give you the benefit of the doubt and do a proper interpretation of the number you've arrived at, its meaning is quite different and quite off topic from this discussion. What you have calculated is the total share of costs that Visa represents in that 12 trillion dollar part of the economy. It is like saying Visa's share of GDP is 0.1%.
- arcticbull 2y ago
  I didn't say that was their profit margin, that's their transaction margin. As my mother used to say if you have nothing nice to say you're better off staying quiet ;)