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If I invested in a 100x machine because I needed 100 of x to run, and somebody shows how 10x can work, why have I not just become the holder of 10 10x machines,
by ggm 2y ago
If I invested in a 100x machine because I needed 100 of x to run, and somebody shows how 10x can work, why have I not just become the holder of 10 10x machines, and therefore have already achieved capex to exploit this new market?
I cannot understand why "openai is dead" has legs: repurpose the hardware and data and it can be multiple instances of the more efficient model.
- stevenhuang 2y agobecause of discounted cash flow/valuation models. you invest in a 100x machine expecting a revenue of X, but now you can only charge X/100 because R1 shows that AI inference can be done much more efficiently. see the price decrease of ChatGPT and addition of free O3 etc. this reduction of future cash flows, ceteris paribus, implies that the present value of these cash flows decrease. this then results in massive repricing to the downside as market participants update their forecasts. what you are missing is that to assume as you do, you must make the additional assumption that demand for additional compute is infinite. Which may very well be the case, but it is not guaranteed compared to the present realized fact that R1 means lower revenues for AI inference providers -> changes the capex justification for even more hardware -> NVDA receives less revenue.
- ggm 2y agoThanks. Always a mistake to assume the price of something is bound to your own cost of doing it: the price is bound to the other guys cheaper price!