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Nvidia is interested in commoditizing their complements. It's a business strategy to decrease the power of OpenAI (for instance). Nvidia dreams of a world wher

by sounds 1y ago

Nvidia is interested in commoditizing their complements. It's a business strategy to decrease the power of OpenAI (for instance). Nvidia dreams of a world where there are lots of "open" alternatives to OpenAI, like there are lots of open game engines and lots open software in general. All buying closed Nvidia chips.

arthurcolle 1y ago
Why is OpenAI a threat to Nvidia? They are still highly dependent on those GPUs
- tomrod 1y ago
  Two concepts - Monopsony is the inverse of Monopoly -- one buyer. Walmart is often a monopsony for suppliers (exclusive or near exclusive). - Desire for vertical integration and value extraction, related to #1 but with some additional nuances
  - next_xibalba 1y ago
    Who is the one buyer in the Nvidia scenario? How would that benefit Nvidia?
    - KaoruAoiShiho 1y ago
      It would hurt nvidia not benefit, that's why nvidia spends a lot of effort to prevent that from happening, and it's not the case currently. They really need to avoid the situation in the console market, where the fact there's only 3 customers means almost no margins on console chips.
      - next_xibalba 1y ago
        Prior to the A.I. boom, Nvidia had a much, much more diverse customer base in terms of revenue mix. According to their 2015 annual report[1], their revenues were spread across the following revenue segments: gaming, automotive, enterprise, HPC and cloud, and PC and mobile OEMs. Gaming was the largest segment and contributed less than 50% of revenues. At this time, with a diverse customer base, their gross margins were 55.5%. (This is a fantastic gross margin in any industry outside software). In 2025 (fiscal year), Nvidia only reported two revenue segments: compute and networking ($116B revenue) and graphics ($14.3B revenue). Within the compute and networking segment, three customers represented 34% of all revenue. Nvidia's gross margins for fiscal 2025 were 75% [2]. In other words, this hypothesis doesn't fit at all. In this case, having more concentration in extremely deep pocketed customers competing over a constrained supply of product has caused margins to sky rocket. Moreover, GP's claim of monopsony doesn't make any sense. Nvidia is not at any risk of having a single buyer, and with the recent news that sales to China will be allowed, the customer base is going to become more diverse, creating even more demand for their products. [1] https://s201.q4cdn.com/141608511/files/doc_financials/annual/2015/2015_NVDA_Annual_Report.pdf https://s201.q4cdn.com/141608511/files/doc_financials/annual... [2] https://s201.q4cdn.com/141608511/files/doc_financials/2025/annual/NVIDIA-2025-Annual-Report.pdf https://s201.q4cdn.com/141608511/files/doc_financials/2025/a...
        KaoruAoiShiho 1y ago
        Nobody said this was the case... The only example I used was the console market which has been ruined because of this issue. They generally left that market because it was that horrible.
        next_xibalba 1y ago
        This whole subthread is about the claim that Nvidia is at risk of a monopsony situation. I pointed out that while revenue has concentrated on a few customers post-AI boom, margins have improved, suggesting Nvidia is nowhere near and not veering toward that risk. Revenue is exploding, as are margins.
        Jlagreen 1y ago
        The console market is low margin because they seem to find someone ready to take low margin (e.g. AMD). Nvidia was in console market before but left it due to low margin. Nvidia only sells old low development chip with probably good margin to Nintendo. The chips in the Switch 2 are using node from 2020 and are super cheap in manufacturing and Nvidia had low efforts in developing them. AMD however has to design new special APUs for Xbox and PS. Why do they do that? They could just decide to step away from the tender but they won't because they seem to be desperate for any business. Jensen was like that 20 years ago but he has learned that some business you simply step away from.
        tomrod 1y ago
        I'm not sure your analysis is apples to apples. Prior to the AI boom, the quality of GPUs slightly favored NVidia but AMD was a viable alternative. Also, there are scale differences between 2025 and before the AI boom -- simply put, there was more competition in the market for a smaller bucket and favorable winds on supplier production costs. Further, they just have better software tooling through CUDA. Since 2022 and the rise of multi-billion parameter models, NVidia's CUDA has had a lock on the business side, but face rising costs due to terrible trade policy by the US, significant rebound from COVID as well as geopolitical realignments, inflation on the workforce, and rushed/buggy power supplies as their default supply options have made their position quite untenable -- mostly CUDA is their saving grace. If AMD got their druthers about them and focused they'd potentially unseat NVidia. But until ROCm is at least _easy_ nothing will happen there.
- grim_io 1y ago
  Google shows that Nvidia is not necessary. How long until more follow?
  - NitpickLawyer 1y ago
    Tbf, goog started a long time ago with their TPUs. And they've had some bumps along the way. It's not as easy as one might think. There are certainly efforts to produce alternatives, but it's not an easy task. Even the ASIC-like providers like cerberas and groq are having problems with large models. They seemed very promising with SLMs, but once MoEs became a thing they started to struggle.
  - arthurcolle 1y ago
    I agree in principle but you can't just yolo fab TPUs and leapfrog google
  - ivape 1y ago
    I don't think we can say that until we hear how Genie3 and Veo3 were trained. My hunch is that the next-gen multi-modal models that combine world, video, text, and image models can only be trained on the best chips.
- patates 1y ago
  Maybe if they grow too much they'd develop their own chips. Also if one company wins, as in they wipe out the competition, they'd have much less incentive to train more and more advanced models.
- vlovich123 1y ago
  If OpenAI becomes the only buyer, they can push around Nvidia and invest in alternatives to blunt their power. If OpenAI is one of many customers, then they’re not a strong bargaining position and Nvidia gets to set the terms.
- victorbjorklund 1y ago
  One large customer has more bargin power than many big ones. And risk is OpenAI would try to make their own chips if they capture all the market.
someone7x 1y ago
> commoditizing their complements Feels like a modern euphemism for “subjugate their neighbors”.
- jvanderbot 1y ago
  Business has always been a civilized version of war, and one which will always capture us in similar ways, so I guess wartime analogies are appropriate? Still it feels awful black and white to phrase it that way when this is a clear net good and better alignment of incentives than before.
- skybrian 1y ago
  No, it’s encouraging competition and cost-cutting in a part of the market they don’t control. This can be a reason for companies to support open source, for example. Meanwhile, the companies running data centers will look for ways to support alternatives to Nvidia. That’s how they keep costs down. It’s a good way to play companies off each other, when it works.
  - deleted 1y ago
    [deleted]
amelius 1y ago
But AI depends on a small number of tensor operators, primitives which can be relatively easily implemented by competitors, so compute is very close to being a commodity when it comes to AI. A company like Cerebras (founded in 2015) proves that this is true. The moat is not in computer architecture. I'd say the real moat is in semiconductor fabrication.
- sounds 1y ago
  Have you ever tried to run a model from huggingface on an AMD GPU? Semiconductor fabrication is a high risk business. Nvidia invested heavily in CUDA and out-competed AMD (and Intel). They are working hard to keep their edge in developer mindshare, while chasing hardware profits at the same time.
  - amelius 1y ago
    > Have you ever tried to run a model from huggingface on an AMD GPU? No, but seeing how easily they run on Apple hardware, I don't understand your point, to be honest.
  - phkahler 1y ago
    >> Have you ever tried to run a model from huggingface on an AMD GPU? Yes. I'd never touched any of that stuff and then one day decided to give it a shot. Some how-to told me how to run something on Linux which had a choice of a few different LLMs. I picked one of the small ones (under 10B) and had it running on my AMD APU inside of 15 minutes. The weights were IIRC downloaded from huggingface. The wrapper was not. Anyway, what's the problem? BTW that convinced me that small LLMs are basically worthless. IMA need to go bigger next time. BTW my "old" 5700G has 64GB of RAM, next build I'll go at least double that.
- bilbo0s 1y ago
  which can be relatively easily implemented by competitors Oh my. Please people, try to think back to your engineering classes. Remember the project where you worked with a group to design a processor? I do. Worst semester of my life. (Screw whoever even came up with that damn real analysis math class.) And here's the kicker, I know I'll be dating myself here, but all I had to do for my part was tape it out. Still sucked. Not sure I'd call the necessary processor design work here "relatively easy"? Even for highly experienced, extremely bright people, this is not "relatively easy". Far more easy to make the software a commodity. Believe me.
PeterStuer 1y ago
I thought they assumed AI hardware would become commoditized sooner rather than later, and their play was to sell complete vertically integrated AI solution stacks, mainly a software and services play?

by sounds 1y ago

arthurcolle 1y ago

Why is OpenAI a threat to Nvidia? They are still highly dependent on those GPUs

tomrod 1y ago
Two concepts - Monopsony is the inverse of Monopoly -- one buyer. Walmart is often a monopsony for suppliers (exclusive or near exclusive). - Desire for vertical integration and value extraction, related to #1 but with some additional nuances
- next_xibalba 1y ago
  Who is the one buyer in the Nvidia scenario? How would that benefit Nvidia?
  - KaoruAoiShiho 1y ago
    It would hurt nvidia not benefit, that's why nvidia spends a lot of effort to prevent that from happening, and it's not the case currently. They really need to avoid the situation in the console market, where the fact there's only 3 customers means almost no margins on console chips.
    - next_xibalba 1y ago
      Prior to the A.I. boom, Nvidia had a much, much more diverse customer base in terms of revenue mix. According to their 2015 annual report[1], their revenues were spread across the following revenue segments: gaming, automotive, enterprise, HPC and cloud, and PC and mobile OEMs. Gaming was the largest segment and contributed less than 50% of revenues. At this time, with a diverse customer base, their gross margins were 55.5%. (This is a fantastic gross margin in any industry outside software). In 2025 (fiscal year), Nvidia only reported two revenue segments: compute and networking ($116B revenue) and graphics ($14.3B revenue). Within the compute and networking segment, three customers represented 34% of all revenue. Nvidia's gross margins for fiscal 2025 were 75% [2]. In other words, this hypothesis doesn't fit at all. In this case, having more concentration in extremely deep pocketed customers competing over a constrained supply of product has caused margins to sky rocket. Moreover, GP's claim of monopsony doesn't make any sense. Nvidia is not at any risk of having a single buyer, and with the recent news that sales to China will be allowed, the customer base is going to become more diverse, creating even more demand for their products. [1] https://s201.q4cdn.com/141608511/files/doc_financials/annual/2015/2015_NVDA_Annual_Report.pdf https://s201.q4cdn.com/141608511/files/doc_financials/annual... [2] https://s201.q4cdn.com/141608511/files/doc_financials/2025/annual/NVIDIA-2025-Annual-Report.pdf https://s201.q4cdn.com/141608511/files/doc_financials/2025/a...
      - KaoruAoiShiho 1y ago
        Nobody said this was the case... The only example I used was the console market which has been ruined because of this issue. They generally left that market because it was that horrible.
        next_xibalba 1y ago
        This whole subthread is about the claim that Nvidia is at risk of a monopsony situation. I pointed out that while revenue has concentrated on a few customers post-AI boom, margins have improved, suggesting Nvidia is nowhere near and not veering toward that risk. Revenue is exploding, as are margins.
        Jlagreen 1y ago
        The console market is low margin because they seem to find someone ready to take low margin (e.g. AMD). Nvidia was in console market before but left it due to low margin. Nvidia only sells old low development chip with probably good margin to Nintendo. The chips in the Switch 2 are using node from 2020 and are super cheap in manufacturing and Nvidia had low efforts in developing them. AMD however has to design new special APUs for Xbox and PS. Why do they do that? They could just decide to step away from the tender but they won't because they seem to be desperate for any business. Jensen was like that 20 years ago but he has learned that some business you simply step away from.
      - tomrod 1y ago
        I'm not sure your analysis is apples to apples. Prior to the AI boom, the quality of GPUs slightly favored NVidia but AMD was a viable alternative. Also, there are scale differences between 2025 and before the AI boom -- simply put, there was more competition in the market for a smaller bucket and favorable winds on supplier production costs. Further, they just have better software tooling through CUDA. Since 2022 and the rise of multi-billion parameter models, NVidia's CUDA has had a lock on the business side, but face rising costs due to terrible trade policy by the US, significant rebound from COVID as well as geopolitical realignments, inflation on the workforce, and rushed/buggy power supplies as their default supply options have made their position quite untenable -- mostly CUDA is their saving grace. If AMD got their druthers about them and focused they'd potentially unseat NVidia. But until ROCm is at least _easy_ nothing will happen there.
grim_io 1y ago
Google shows that Nvidia is not necessary. How long until more follow?
- NitpickLawyer 1y ago
  Tbf, goog started a long time ago with their TPUs. And they've had some bumps along the way. It's not as easy as one might think. There are certainly efforts to produce alternatives, but it's not an easy task. Even the ASIC-like providers like cerberas and groq are having problems with large models. They seemed very promising with SLMs, but once MoEs became a thing they started to struggle.
- arthurcolle 1y ago
  I agree in principle but you can't just yolo fab TPUs and leapfrog google
- ivape 1y ago
  I don't think we can say that until we hear how Genie3 and Veo3 were trained. My hunch is that the next-gen multi-modal models that combine world, video, text, and image models can only be trained on the best chips.
patates 1y ago
Maybe if they grow too much they'd develop their own chips. Also if one company wins, as in they wipe out the competition, they'd have much less incentive to train more and more advanced models.
vlovich123 1y ago
If OpenAI becomes the only buyer, they can push around Nvidia and invest in alternatives to blunt their power. If OpenAI is one of many customers, then they’re not a strong bargaining position and Nvidia gets to set the terms.
victorbjorklund 1y ago
One large customer has more bargin power than many big ones. And risk is OpenAI would try to make their own chips if they capture all the market.

someone7x 1y ago

> commoditizing their complements Feels like a modern euphemism for “subjugate their neighbors”.

jvanderbot 1y ago
Business has always been a civilized version of war, and one which will always capture us in similar ways, so I guess wartime analogies are appropriate? Still it feels awful black and white to phrase it that way when this is a clear net good and better alignment of incentives than before.
skybrian 1y ago
No, it’s encouraging competition and cost-cutting in a part of the market they don’t control. This can be a reason for companies to support open source, for example. Meanwhile, the companies running data centers will look for ways to support alternatives to Nvidia. That’s how they keep costs down. It’s a good way to play companies off each other, when it works.
- deleted 1y ago
  [deleted]

amelius 1y ago

But AI depends on a small number of tensor operators, primitives which can be relatively easily implemented by competitors, so compute is very close to being a commodity when it comes to AI. A company like Cerebras (founded in 2015) proves that this is true. The moat is not in computer architecture. I'd say the real moat is in semiconductor fabrication.

sounds 1y ago
Have you ever tried to run a model from huggingface on an AMD GPU? Semiconductor fabrication is a high risk business. Nvidia invested heavily in CUDA and out-competed AMD (and Intel). They are working hard to keep their edge in developer mindshare, while chasing hardware profits at the same time.
- amelius 1y ago
  > Have you ever tried to run a model from huggingface on an AMD GPU? No, but seeing how easily they run on Apple hardware, I don't understand your point, to be honest.
- phkahler 1y ago
  >> Have you ever tried to run a model from huggingface on an AMD GPU? Yes. I'd never touched any of that stuff and then one day decided to give it a shot. Some how-to told me how to run something on Linux which had a choice of a few different LLMs. I picked one of the small ones (under 10B) and had it running on my AMD APU inside of 15 minutes. The weights were IIRC downloaded from huggingface. The wrapper was not. Anyway, what's the problem? BTW that convinced me that small LLMs are basically worthless. IMA need to go bigger next time. BTW my "old" 5700G has 64GB of RAM, next build I'll go at least double that.
bilbo0s 1y ago
which can be relatively easily implemented by competitors Oh my. Please people, try to think back to your engineering classes. Remember the project where you worked with a group to design a processor? I do. Worst semester of my life. (Screw whoever even came up with that damn real analysis math class.) And here's the kicker, I know I'll be dating myself here, but all I had to do for my part was tape it out. Still sucked. Not sure I'd call the necessary processor design work here "relatively easy"? Even for highly experienced, extremely bright people, this is not "relatively easy". Far more easy to make the software a commodity. Believe me.

PeterStuer 1y ago

I thought they assumed AI hardware would become commoditized sooner rather than later, and their play was to sell complete vertically integrated AI solution stacks, mainly a software and services play?