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Okay I really dont understand this, nvidia has a 3.4T market cap google has a 2.4T post run up, and its PE is like 38 vs 25 so its a higher multiple on the busi

Okay I really dont understand this, nvidia has a 3.4T market cap google has a 2.4T post run up, and its PE is like 38 vs 25 so its a higher multiple on the business too. It appears making the best AI chip is a better business than googles entire conglomerate. If TPU's are really that good why on earth would google not sell them. People say its better to rent, but how can that be true when you look at the value of nvidia.

LittleTimothy 2y ago
I don't know why you'd be confused by the valuations, they're just 2 different businesses. Google is an ad sales business with an extremely strong revenue driver (youtube and Search) so it churns out money but it's pretty well understood revenue stream and is facing some possible disruption. Nvidia is a chip sales business and whether through luck or through skill (or both) they've essentially ended up as the monopoly provider of the worlds best chips. It's not unreasonable to expect Nvidia can squeeze a tonne of cash out of their customers for the next few years in an undisruptable way. So it's easy to understand the valuations. On the GPU side - One way to look at it is lets just ignore whether you're selling chips. Let's just look at where compute is done - because Google let's you rent time on the TPUs so if they're really great people will just choose to rent time on them. How much time is being rented on TPUs in the cloud vs. Nvidia GPUs? Google's TPUs are not a market leader, they're probably not even significant market share. Pretend Google decided to sell TPUs tomorrow - are many people who weren't choosing to rent TPUs going to decide to buy them? No. There's an element of interoperability and supply chain etc. etc. but I think the core of it is a full ML product the TPU isn't anywhere close to the Nvidia GPUs.
- lanthissa 2y ago
  I'd be confused by them choosing to not enter hte more lucrative business if they had the product to do so. The only way the current situation makes sense is if your last sentence is true, which is what i'm getting at. Either TPUs are significantly behind Nvidia chips, or google is choosing not to add like a trillion dollars of market cap to their business its really one or the other.
- VirusNewbie 2y ago
  From my understanding TPUs are in so much demand it’s hard to even get access to to the best ones on GCP. It’s a capacity issue more than a popularity one.
shaism 2y ago
Maybe the market hasn’t recognized the value yet. Hence, buy $GOOG.
theptip 2y ago
As a modeling exercise: this isn’t necessarily inconsistent. Right now if Google can earn more from using their TPUs than they would selling them (ie profitably utilize them) they would be crazy to sell them. Companies are valued not on their present value, but the net present value of their future earnings. So the big multiple implies that there is much more revenue growth potential here. For example, NVidia has Cuda, Google doesn’t have anything as good for third party users. Maybe the market is pricing in that Google doesn’t have a good path to manufacture and sell these chips externally, while NVidia has room to grow into every 1GW datacenter that’s built over the next few decades.
- evanjrowley 2y ago
  >Right now if Google can earn more from using their TPUs than they would selling them (ie profitably utilize them) they would be crazy to sell them. Reminds me of what happened with Bitcoin mining ASICs. Everyone capable of making them realized they could make more money using them directly vs. selling them to others.
hn3er1q 2y ago
> If TPU's are really that good why on earth would google not sell them. nVidia sells nearly 4M GPUs per year. Google claims like 100K TPUs. Scaling a production line by 10x is very difficult and Google has not shown aptitude in this area of expertise. Even if Google wanted to scale 10x I'm not sure they could. nVidia is believed to be taking like half of TSMC's new capacity (existing capacity is not idle). I suppose technically that means the other half could be consumed by Google but it's likely TSMCs other customers wouldn't appreciate that.

LittleTimothy 2y ago

I don't know why you'd be confused by the valuations, they're just 2 different businesses. Google is an ad sales business with an extremely strong revenue driver (youtube and Search) so it churns out money but it's pretty well understood revenue stream and is facing some possible disruption. Nvidia is a chip sales business and whether through luck or through skill (or both) they've essentially ended up as the monopoly provider of the worlds best chips. It's not unreasonable to expect Nvidia can squeeze a tonne of cash out of their customers for the next few years in an undisruptable way. So it's easy to understand the valuations. On the GPU side - One way to look at it is lets just ignore whether you're selling chips. Let's just look at where compute is done - because Google let's you rent time on the TPUs so if they're really great people will just choose to rent time on them. How much time is being rented on TPUs in the cloud vs. Nvidia GPUs? Google's TPUs are not a market leader, they're probably not even significant market share. Pretend Google decided to sell TPUs tomorrow - are many people who weren't choosing to rent TPUs going to decide to buy them? No. There's an element of interoperability and supply chain etc. etc. but I think the core of it is a full ML product the TPU isn't anywhere close to the Nvidia GPUs.

lanthissa 2y ago
I'd be confused by them choosing to not enter hte more lucrative business if they had the product to do so. The only way the current situation makes sense is if your last sentence is true, which is what i'm getting at. Either TPUs are significantly behind Nvidia chips, or google is choosing not to add like a trillion dollars of market cap to their business its really one or the other.
VirusNewbie 2y ago
From my understanding TPUs are in so much demand it’s hard to even get access to to the best ones on GCP. It’s a capacity issue more than a popularity one.

shaism 2y ago

Maybe the market hasn’t recognized the value yet. Hence, buy $GOOG.

theptip 2y ago

As a modeling exercise: this isn’t necessarily inconsistent. Right now if Google can earn more from using their TPUs than they would selling them (ie profitably utilize them) they would be crazy to sell them. Companies are valued not on their present value, but the net present value of their future earnings. So the big multiple implies that there is much more revenue growth potential here. For example, NVidia has Cuda, Google doesn’t have anything as good for third party users. Maybe the market is pricing in that Google doesn’t have a good path to manufacture and sell these chips externally, while NVidia has room to grow into every 1GW datacenter that’s built over the next few decades.

evanjrowley 2y ago
>Right now if Google can earn more from using their TPUs than they would selling them (ie profitably utilize them) they would be crazy to sell them. Reminds me of what happened with Bitcoin mining ASICs. Everyone capable of making them realized they could make more money using them directly vs. selling them to others.

hn3er1q 2y ago

> If TPU's are really that good why on earth would google not sell them. nVidia sells nearly 4M GPUs per year. Google claims like 100K TPUs. Scaling a production line by 10x is very difficult and Google has not shown aptitude in this area of expertise. Even if Google wanted to scale 10x I'm not sure they could. nVidia is believed to be taking like half of TSMC's new capacity (existing capacity is not idle). I suppose technically that means the other half could be consumed by Google but it's likely TSMCs other customers wouldn't appreciate that.