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Doesn’t your point about video compression tech support Nvidia’s bull case? Better video compression led to an explosion in video consumption on the Internet,

Doesn’t your point about video compression tech support Nvidia’s bull case? Better video compression led to an explosion in video consumption on the Internet, leading to much more revenue for companies like Comcast, Google, T-Mobile, Verizon, etc. More efficient LLMs lead to much more AI usage. Nvidia, TSMC, etc will benefit.

vFunct 2y ago
I agree that advancements like DeepSeek, like transformer models before it, is just going to end up increasing demand. It’s very shortsighted to think we’re going to need fewer chips because the algorithms got better. The system became more efficient, which causes induced demand.
- floatrock 2y ago
  obligatory https://en.wikipedia.org/wiki/Jevons_paradox https://en.wikipedia.org/wiki/Jevons_paradox
- diamond559 2y ago
  More demand for what, chatbots? ai slop? buggy code?
- eru 2y ago
  It will increase the total volume demanded, but not necessarily the amount of value that companies like NVidia can capture. Most likely, consumer surplus has gone up.
snailmailstare 2y ago
It improves TSMC' case.. Paying Nvidia would be like paying Cray for every smartphone that is faster than a supercomputer of old.
9rx 2y ago
Yes, over the long haul, probably. But as far as individual investors go they might not like that Nvidia. Anyone currently invested is presumably in because they like the insanely high profit margin, and this is apt to quash that. There is now much less reason to give your first born to get your hands on their wares. Comcast, Google, T-Mobile, Verizon, etc., and especially those not named Google, have nothingburger margins in comparison. If you are interested in what they can do with volume, then there is still a lot of potential. They may even be more profitable on that end than a margin play could ever hope for. But that interest is probably not from the same person who currently owns the stock, it being a change in territory, and there is apt to be a lot of instability as stock changes hands from the one group to the next.
- eru 2y ago
  > Anyone currently invested is presumably in because they like the insanely high profit margin, [...] I'm invested in Nvidia because it's part of the index that my ETF is tracking. I have no clue what their profit margins are.
  - 9rx 2y ago
    > I'm invested in Nvidia [...] my ETF That would be an unusual situation for an ETF. An ETF does not usually extend ownership of the underlying investment portfolio. An ETF normally offers investors the opportunity to invest in the ETF itself. The ETF is what you would be invested in. Your concern as an investor in an ETF would only be with the properties of the ETF, it being what you are invested in, and this seems to be true in your case as well given how you describe it. Are you certain you are invested in Nvidia? The outcome of the ETF may depend on Nvidia, but it may also depend on how a butterfly in Africa happens to flap its wings. You aren't, by any common definition found within this type of context, invested in that butterfly.
    - eru 2y ago
      Technically, all the Nvidia stock (and virtually all stocks in the US) are owned by Cede and Co. So Nvidia has only one investor.[0] There's several layers of indirection between your Robinhood portfolio and the actual Nvidia shares, even if Robinhood mentions NVDA as a position in your portfolio. The ETF is just one more layer of indirection. You might like to read https://en.wikipedia.org/wiki/Exchange-traded_fund#Arbitrage_mechanism https://en.wikipedia.org/wiki/Exchange-traded_fund#Arbitrage... to see how ETFs are connected to the underlying assets. You will find that the connection between ETFs and the underlying assets in the index is much more like the connection between your Robinhood portfolio and Nvidia, than the connection between butterflies and thunderstorms. [0] At least for its stocks. Its bonds are probably held in different but equally weird ways.
      - 9rx 2y ago
        > Technically, all the Nvidia stock (and virtually all stocks in the US) are owned by Cede and Co. Technically, but they extend ownership. An ETF is a different type of abstraction. Which you already know because you spoke about that abstraction in your original comment, so why play stupid now?
onlyrealcuzzo 2y ago
No - because this eliminates entirely or shifts the majority of work from GPU to CPU - and Nvidia does not sell CPUs. If the AI market gets 10x bigger, and GPU work gets 50% smaller (which is still 5x larger than today) - but Nvidia is priced on 40% growth for the next ten years (28x larger) - there is a price mismatch. It is theoretically possible for a massive reduction in GPU usage or shift from GPU to CPU to benefit Nvidia if that causes the market to grow enough - but it seems unlikely. Also, I believe (someone please correct if wrong) DeepSeek is claiming a 95% overall reduction in GPU usage compared to traditional methods (not the 50% in the example above). If true, that is a death knell for Nvidia's growth story after the current contracts end.
- munksbeer 2y ago
  I can see close to zero possibility that the majority of the work will be shifted to the CPU. Anything a CPU can do can just be done better with specialised GPU hardware.
  - lokar 2y ago
    People have been saying the exact same thing about other workloads for years, and always been wrong. Mostly claiming custom chips or FPGAs will beat out general purpose CPUs.
  - Vegenoid 2y ago
    Then why do we have powerful CPUs instead of a bunch of specialized hardware? It's because the value of a CPU is in its versatility and ubiquity. If a CPU can do a thing good enough, then most programs/computers will do that thing on a CPU instead of having the increased complexity and cost of a GPU, even if a GPU would do it better.
    - chrisco255 2y ago
      We have both? Modern computing devices like smart phones use SoCs with integrated GPUs. GPUs aren't really specialized hardware, either, they are general purpose hardware useful in many scenarios (built for graphics originally but clearly useful in other domains including AI).
pjdesno 2y ago
No, it doesn't. Not only are 10-100x changes disruptive, but the players who don't adopt them quickly are going to be the ones who continue to buy huge amounts of hardware to pursue old approaches, and it's hard for incumbent vendors to avoid catering to their needs, up until it's too late. When everyone gets up off the ground after the play is over, Nvidia might still be holding the ball but it might just as easily be someone else.
mandevil 2y ago
It lead to more revenue for the industry as a whole. But not necessarily for the individual companies that bubbled the hardest: Cisco stock is still to this day lower than it was at peak in 2000, to point to a significant company that sold actual physical infra products necessary for the internet and still around and profitable to this day. (Some companies that bubbled did quite well, AMZN is like 75x from where it was in 2000. But that's a totally different company that captured an enormous amount of value from AWS that was not visible to the market in 2000, so it makes sense.) If stock market-cap is (roughly) the market's aggregated best guess of future profits integrated over all time, discounted back to the present at some (the market's best guess of the future?) rate, then increasing uncertainty about the predicted profits 5-10 years from now can have enormous influence on the stock. Does NVDA have an AWS within it now?
- aurareturn 2y ago
  >It lead to more revenue for the industry as a whole. But not necessarily for the individual companies that bubbled the hardest: Cisco stock is still to this day lower than it was at peak in 2000, to point to a significant company that sold actual physical infra products necessary for the internet and still around and profitable to this day. (Some companies that bubbled did quite well, AMZN is like 75x from where it was in 2000. But that's a totally different company that captured an enormous amount of value from AWS that was not visible to the market in 2000, so it makes sense.) Cisco in 1994: $3. Cisco after dotcom bubble: $13. So is Nvidia's stock price closer to 1994 or 2001?
fspeech 2y ago
If you normalize Nvidia's gross margin and take into account of competitors sure. But its current high margin is driven by Big Tech FOMO. Do keep in mind that 90% margin or 10x cost to 50% margin or 2x cost is a 5x price reduction.
- aurareturn 2y ago
  So why would DeepSeek decrease FOMO? It should increase it if anything.
  - Vegenoid 2y ago
    Because DeepSeek demonstrates that loads of compute isn't necessary for high-performing models, and so we won't need as much and as powerful of hardware as was previously thought, which is what Nivida's valuation is based on?
    - natecham 2y ago
      That's assuming there isn't demand for more powerful models, there's still plenty of room for improvement from the current generation. We didn't stop at GPT-3 level models when that was achieved.

vFunct 2y ago

I agree that advancements like DeepSeek, like transformer models before it, is just going to end up increasing demand. It’s very shortsighted to think we’re going to need fewer chips because the algorithms got better. The system became more efficient, which causes induced demand.

floatrock 2y ago
obligatory https://en.wikipedia.org/wiki/Jevons_paradox https://en.wikipedia.org/wiki/Jevons_paradox
diamond559 2y ago
More demand for what, chatbots? ai slop? buggy code?
eru 2y ago
It will increase the total volume demanded, but not necessarily the amount of value that companies like NVidia can capture. Most likely, consumer surplus has gone up.

snailmailstare 2y ago

It improves TSMC' case.. Paying Nvidia would be like paying Cray for every smartphone that is faster than a supercomputer of old.

9rx 2y ago

Yes, over the long haul, probably. But as far as individual investors go they might not like that Nvidia. Anyone currently invested is presumably in because they like the insanely high profit margin, and this is apt to quash that. There is now much less reason to give your first born to get your hands on their wares. Comcast, Google, T-Mobile, Verizon, etc., and especially those not named Google, have nothingburger margins in comparison. If you are interested in what they can do with volume, then there is still a lot of potential. They may even be more profitable on that end than a margin play could ever hope for. But that interest is probably not from the same person who currently owns the stock, it being a change in territory, and there is apt to be a lot of instability as stock changes hands from the one group to the next.

eru 2y ago
> Anyone currently invested is presumably in because they like the insanely high profit margin, [...] I'm invested in Nvidia because it's part of the index that my ETF is tracking. I have no clue what their profit margins are.
- 9rx 2y ago
  > I'm invested in Nvidia [...] my ETF That would be an unusual situation for an ETF. An ETF does not usually extend ownership of the underlying investment portfolio. An ETF normally offers investors the opportunity to invest in the ETF itself. The ETF is what you would be invested in. Your concern as an investor in an ETF would only be with the properties of the ETF, it being what you are invested in, and this seems to be true in your case as well given how you describe it. Are you certain you are invested in Nvidia? The outcome of the ETF may depend on Nvidia, but it may also depend on how a butterfly in Africa happens to flap its wings. You aren't, by any common definition found within this type of context, invested in that butterfly.
  - eru 2y ago
    Technically, all the Nvidia stock (and virtually all stocks in the US) are owned by Cede and Co. So Nvidia has only one investor.[0] There's several layers of indirection between your Robinhood portfolio and the actual Nvidia shares, even if Robinhood mentions NVDA as a position in your portfolio. The ETF is just one more layer of indirection. You might like to read https://en.wikipedia.org/wiki/Exchange-traded_fund#Arbitrage_mechanism https://en.wikipedia.org/wiki/Exchange-traded_fund#Arbitrage... to see how ETFs are connected to the underlying assets. You will find that the connection between ETFs and the underlying assets in the index is much more like the connection between your Robinhood portfolio and Nvidia, than the connection between butterflies and thunderstorms. [0] At least for its stocks. Its bonds are probably held in different but equally weird ways.
    - 9rx 2y ago
      > Technically, all the Nvidia stock (and virtually all stocks in the US) are owned by Cede and Co. Technically, but they extend ownership. An ETF is a different type of abstraction. Which you already know because you spoke about that abstraction in your original comment, so why play stupid now?

onlyrealcuzzo 2y ago

No - because this eliminates entirely or shifts the majority of work from GPU to CPU - and Nvidia does not sell CPUs. If the AI market gets 10x bigger, and GPU work gets 50% smaller (which is still 5x larger than today) - but Nvidia is priced on 40% growth for the next ten years (28x larger) - there is a price mismatch. It is theoretically possible for a massive reduction in GPU usage or shift from GPU to CPU to benefit Nvidia if that causes the market to grow enough - but it seems unlikely. Also, I believe (someone please correct if wrong) DeepSeek is claiming a 95% overall reduction in GPU usage compared to traditional methods (not the 50% in the example above). If true, that is a death knell for Nvidia's growth story after the current contracts end.

munksbeer 2y ago
I can see close to zero possibility that the majority of the work will be shifted to the CPU. Anything a CPU can do can just be done better with specialised GPU hardware.
- lokar 2y ago
  People have been saying the exact same thing about other workloads for years, and always been wrong. Mostly claiming custom chips or FPGAs will beat out general purpose CPUs.
- Vegenoid 2y ago
  Then why do we have powerful CPUs instead of a bunch of specialized hardware? It's because the value of a CPU is in its versatility and ubiquity. If a CPU can do a thing good enough, then most programs/computers will do that thing on a CPU instead of having the increased complexity and cost of a GPU, even if a GPU would do it better.
  - chrisco255 2y ago
    We have both? Modern computing devices like smart phones use SoCs with integrated GPUs. GPUs aren't really specialized hardware, either, they are general purpose hardware useful in many scenarios (built for graphics originally but clearly useful in other domains including AI).

pjdesno 2y ago

No, it doesn't. Not only are 10-100x changes disruptive, but the players who don't adopt them quickly are going to be the ones who continue to buy huge amounts of hardware to pursue old approaches, and it's hard for incumbent vendors to avoid catering to their needs, up until it's too late. When everyone gets up off the ground after the play is over, Nvidia might still be holding the ball but it might just as easily be someone else.

mandevil 2y ago

It lead to more revenue for the industry as a whole. But not necessarily for the individual companies that bubbled the hardest: Cisco stock is still to this day lower than it was at peak in 2000, to point to a significant company that sold actual physical infra products necessary for the internet and still around and profitable to this day. (Some companies that bubbled did quite well, AMZN is like 75x from where it was in 2000. But that's a totally different company that captured an enormous amount of value from AWS that was not visible to the market in 2000, so it makes sense.) If stock market-cap is (roughly) the market's aggregated best guess of future profits integrated over all time, discounted back to the present at some (the market's best guess of the future?) rate, then increasing uncertainty about the predicted profits 5-10 years from now can have enormous influence on the stock. Does NVDA have an AWS within it now?

aurareturn 2y ago
>It lead to more revenue for the industry as a whole. But not necessarily for the individual companies that bubbled the hardest: Cisco stock is still to this day lower than it was at peak in 2000, to point to a significant company that sold actual physical infra products necessary for the internet and still around and profitable to this day. (Some companies that bubbled did quite well, AMZN is like 75x from where it was in 2000. But that's a totally different company that captured an enormous amount of value from AWS that was not visible to the market in 2000, so it makes sense.) Cisco in 1994: $3. Cisco after dotcom bubble: $13. So is Nvidia's stock price closer to 1994 or 2001?

fspeech 2y ago

If you normalize Nvidia's gross margin and take into account of competitors sure. But its current high margin is driven by Big Tech FOMO. Do keep in mind that 90% margin or 10x cost to 50% margin or 2x cost is a 5x price reduction.

aurareturn 2y ago
So why would DeepSeek decrease FOMO? It should increase it if anything.
- Vegenoid 2y ago
  Because DeepSeek demonstrates that loads of compute isn't necessary for high-performing models, and so we won't need as much and as powerful of hardware as was previously thought, which is what Nivida's valuation is based on?
  - natecham 2y ago
    That's assuming there isn't demand for more powerful models, there's still plenty of room for improvement from the current generation. We didn't stop at GPT-3 level models when that was achieved.