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Nvidia has current market cap equivalent to ~8 times ExxonMobil. If tomorrow ExxonMobil disappears from existence, you'd get half of the world paralysed. If Nvi

Nvidia has current market cap equivalent to ~8 times ExxonMobil. If tomorrow ExxonMobil disappears from existence, you'd get half of the world paralysed. If Nvidia tomorrow gets replaced by a massive hole in the ground, you'd just shrug, go down the road a bit and buy AMD. Sure, they can't make cards as fast as Nvidia does, but they still work, the old cards won't suddenly stop working, and they don't even manufacture their own hardware. The AI stocks nowadays are pumped up by pure hype, and it's inevitable that the market will recalibrate sooner or later

intotheabyss 1y ago
I think you're missing part of the story with stocks like NVDA. The value of a stock is also based on expectations, so it could be that all of NVDA's growth for the next decade has already been frontrun by the market, and it's essentially partly a prediction market on how valuable the infrastructure will be for AI, given that the chip requirements will only increase as AI systems are implemented in more and more hardware (robots / appliances / transportation / medicine, etc.). While the growth potential of carbon fuels really remains as it is with modest growths aligned with demand/population, but tempered by alternate energy taking greater and greater marketshare. So it could simultaneously be hype (very optimistic predictions) and yet still valued appropriatey by the market with future expectations priced in, just with some additional premium due to that demand/hype.
JKCalhoun 1y ago
I wouldn't be so quick to pick on AI hype. Investors are always desperately looking for where to put their money. That it is AI suggests, perhaps, that all the alternatives look less promising right now? (And that is a bit tragic.)
wongarsu 1y ago
I'm not sure that's a fair comparison. The difference in the product lifecycle is too big. A GPU has a 3 year depreciation cycle and continues working for well over a decade after that, if I buy gas today I need new gas tomorrow. The market can react in the timespan of years, it can't react in the timespan of weeks, and having a product that isn't used up makes timelines more elastic. If we eliminate both factors by imagining a world where GPUs just stop working every three years and where AMD doesn't have time to ramp up production we'd be pretty screwed without Nvidia, and everything depending on GPUs would quickly grind to a halt. AMD sells a tiny number of dedicated GPUs compared to Nvidia, and right now they have no spare capacity
- bdauvergne 1y ago
  "everything depending on GPUs would quickly grind to a halt." is there any one thing essential depending on the existence of GPU processors ?
  - Auracle 1y ago
    Probably not, but it would still absolutely crash the economy. All we “need” is food + water, shelter, and medicine (kind of). I’d guess people’s economic output doesn’t directly contribute to those.
  - feoren 1y ago
    The word "essential" is lifting your entire argument for you. If "essential" means whatever bdauvergne on Hacker News decides humans deserve to have in their lives, and nothing else, then sure, GPUs are non-essential. But that's not up to you. You don't get to pick and choose what other humans deserve, what they want, and what they are allowed to have. That's all "essential" has ever meant: whatever I, the author, whose Word is obviously Divine, think Other People deserve to have. Why even bother using that word when talking about the economy? It's meaningless. Get rid of it and your argument collapses. People want GPUs.
    - bpt3 1y ago
      Or you could recognize that "essential" has a meaning in economic/financial terms, but that would entirely deflate the ad hominem attack you launched to avoid acknowledging that the answer to his question is: "Not really, with a few possible exceptions in some edge cases." There's absolutely a reason to differentiate between essential and non-essential goods when talking about the economy. Why do you think the US runs a huge food production surplus? Why do you think publicly traded stock sectors include consumer staples (essential goods) and consumer discretionary (non-essential goods and services)?
      - feoren 1y ago
        > Or you could recognize that "essential" has a meaning in economic/financial terms I do not recognize that. That is the point of my argument. A large portion of economics is rich people trying to justify their own greed as being moral. Classifying goods as "essential" vs. "non-essential" is a way of telling poor people what they're allowed to have, and always has been. A good goes from "non-essential" to "essential" only when rich people are worried they'll get guillotined if the poor don't have access to it. I'm aware that it has a definition in terms of what people are able to stop purchasing when their income goes down, or how consumption relates to income levels in general, but the former is a problematic definition for many reasons, and the latter does not actually coincide particularly well with the categories of goods people list off when they think of "essential goods". Humans in real life just don't respond to changing conditions the same way the little econs in your head do; they way you've decided they "should". Ever heard that humans don't "behave logically"? Yeah, that's economists with overly simplified models being annoyed that (mostly) poor people don't act the way that they've decided poor people should act. See the trend? Ask four economists write out a list of "essential goods" and you'll get five different lists. That is not how definitions work. Ask four mathematicians whether something is a Commutative Ring or not and they'll all agree. That's a definition. "Essential" does not have a definition. Its meaning shifts depending on which group the author of the Wall Street Journal op-ed you're reading wants to villainize this time.
throw0101a 1y ago
> Nvidia has current market cap equivalent to ~8 times ExxonMobil. $XOM's current revenues are known and no one will suddenly be throwing billions at them for CapEx purposes. People are throwing billions at the general direction of $NVDA. That's the difference: which company has a better change of (growing) more revenues and profits in the future? > The AI stocks nowadays are pumped up by pure hype, and it's inevitable that the market will recalibrate sooner or later And until that recalibration happens you can buy now and see your holdings go up; then, once you're happy with the ROI (10%? 20%? More?), you can sell and realize your capital gains and have a large number in your account. Or you can not buy now and potentially miss the ride up. Just because The Market™ is (allegedly) irrational does not preclude the possibility you can make money.
- qalmakka 1y ago
  > Just because The Market™ is (allegedly) irrational does not preclude the possibility you can make money. yeah, of course, that's how the whole deal works. I was just pointing out how most of it looked a bit crazy to me
Zigurd 1y ago
I hope this doesn't come across as pedantic and negative, but there is a good reason Why a resource extraction company in a market that topped out a few years ago has got a lower than average PE ratio. On the other hand, Nvidia is a result of the AI bubble. Oddly, though, there's a case to be made that Nvidia could come out of this, even after a correction, looking pretty good. But what I really can't grok is how Tesla keeps an insane P/E ratio after several consecutive quarters of bad news. Or how Grok gets a high valuation without even anything close to OpenAI's money-losing revenue levels, while swallowing a decrepit old social media site. Or how that big rocket can keep blowing up without dinging the valuation.
boringg 1y ago
You should probably think of it with a different perspective. The long term outlook for oil majors is stagnating at best. They provide great logistics for fuel globally but haven't expanded past that. If we continue to go to electricity and go via solar, energy storage, wind and nuclear - you end up in a spot where oil and gas are limited. NVIDIA has blue sky ahead of it -- are valuations totally out of line? Most likely. That said it has a highly desirable product globally. Oil is a valuable commodity but there are many other providers that could snatch up exxonmobil share. Also if you want a better example -- good look at any critical supplier in the food space. Thats way more important - we lose that we get in a world of hurt.
wavemode 1y ago
All you're really highlighting is the difference (from an economic perspective) between needs and wants. The world needs petroleum. But once that need is met, extra petroleum production is pointless. Whereas the world (or, perhaps, a specific class of investors within a specific segment of the world) WANTS generative AI. The amount someone wants something (and, by extension, is willing to pay for it) is potentially unbounded, and can even be uncorrelated with real utility. (See: gemstones, trading cards, cryptocurrency...)
crazygringo 1y ago
> If tomorrow ExxonMobil disappears from existence, you'd get half of the world paralysed. If Nvidia tomorrow gets replaced by a massive hole in the ground, you'd just shrug, go down the road a bit and buy AMD. That's the wrong way to think about it, because the stock price is about all future profit over time, not the current moment. Over the next 50 years, which one do you think will have made more profit? Imagine you're in the year 1900, and you're comparing a light bulb company with a steam engine company. Industry needs steam engines, you say! Half the world would paralyze if they stopped working! Meanwhile, who cares about a light bulb company? But you can understand why light bulbs actually turned out to make much more money moving forwards.
- BizarroLand 1y ago
  If steam engines stopped working suddenly in 1900, we would have fallen back to ooga booga cavemen in months.
dismalaf 1y ago
> Sure, they can't make cards as fast as Nvidia does They both use TSMC. If Nvidia disappeared, TSMC would have more capacity available.
- neoecos 1y ago
  I think the comment wasn't about production speed, but speed of the product in terms of performance
  - dismalaf 1y ago
    The way it's written in English it has to refer to production speed. The context is also about economics. "Make thing as fast as" = "make" is fast. Versus "Make thing that is as fast as" = now the thing is fast. Or use a word like performant which is less ambiguous and would obviously refer to the chips. Can rephrase slightly and it's even more obvious: "I make chips faster than you". Or, "I make chips that are faster than yours".
- CamperBob2 1y ago
  Of course, if TSMC were to disappear, now we're talking Exxon-Mobil levels of disruption.
metrix 1y ago
you're right, but it brings up an even bigger question in my mind - If farms where wiped out we a huge percentage of the population would no longer exist, yet they 100% are a commodity with low margins. We don't value things based on long term risk/need
positr0n 1y ago
That's because businesses are valued by how much money they make, not how essential they are. ExxonMobil has a market cap essentially infinitely larger than my local water supply and the farms that grow my food.

intotheabyss 1y ago

I think you're missing part of the story with stocks like NVDA. The value of a stock is also based on expectations, so it could be that all of NVDA's growth for the next decade has already been frontrun by the market, and it's essentially partly a prediction market on how valuable the infrastructure will be for AI, given that the chip requirements will only increase as AI systems are implemented in more and more hardware (robots / appliances / transportation / medicine, etc.). While the growth potential of carbon fuels really remains as it is with modest growths aligned with demand/population, but tempered by alternate energy taking greater and greater marketshare. So it could simultaneously be hype (very optimistic predictions) and yet still valued appropriatey by the market with future expectations priced in, just with some additional premium due to that demand/hype.

JKCalhoun 1y ago

I wouldn't be so quick to pick on AI hype. Investors are always desperately looking for where to put their money. That it is AI suggests, perhaps, that all the alternatives look less promising right now? (And that is a bit tragic.)

wongarsu 1y ago

I'm not sure that's a fair comparison. The difference in the product lifecycle is too big. A GPU has a 3 year depreciation cycle and continues working for well over a decade after that, if I buy gas today I need new gas tomorrow. The market can react in the timespan of years, it can't react in the timespan of weeks, and having a product that isn't used up makes timelines more elastic. If we eliminate both factors by imagining a world where GPUs just stop working every three years and where AMD doesn't have time to ramp up production we'd be pretty screwed without Nvidia, and everything depending on GPUs would quickly grind to a halt. AMD sells a tiny number of dedicated GPUs compared to Nvidia, and right now they have no spare capacity

bdauvergne 1y ago
"everything depending on GPUs would quickly grind to a halt." is there any one thing essential depending on the existence of GPU processors ?
- Auracle 1y ago
  Probably not, but it would still absolutely crash the economy. All we “need” is food + water, shelter, and medicine (kind of). I’d guess people’s economic output doesn’t directly contribute to those.
- feoren 1y ago
  The word "essential" is lifting your entire argument for you. If "essential" means whatever bdauvergne on Hacker News decides humans deserve to have in their lives, and nothing else, then sure, GPUs are non-essential. But that's not up to you. You don't get to pick and choose what other humans deserve, what they want, and what they are allowed to have. That's all "essential" has ever meant: whatever I, the author, whose Word is obviously Divine, think Other People deserve to have. Why even bother using that word when talking about the economy? It's meaningless. Get rid of it and your argument collapses. People want GPUs.
  - bpt3 1y ago
    Or you could recognize that "essential" has a meaning in economic/financial terms, but that would entirely deflate the ad hominem attack you launched to avoid acknowledging that the answer to his question is: "Not really, with a few possible exceptions in some edge cases." There's absolutely a reason to differentiate between essential and non-essential goods when talking about the economy. Why do you think the US runs a huge food production surplus? Why do you think publicly traded stock sectors include consumer staples (essential goods) and consumer discretionary (non-essential goods and services)?
    - feoren 1y ago
      > Or you could recognize that "essential" has a meaning in economic/financial terms I do not recognize that. That is the point of my argument. A large portion of economics is rich people trying to justify their own greed as being moral. Classifying goods as "essential" vs. "non-essential" is a way of telling poor people what they're allowed to have, and always has been. A good goes from "non-essential" to "essential" only when rich people are worried they'll get guillotined if the poor don't have access to it. I'm aware that it has a definition in terms of what people are able to stop purchasing when their income goes down, or how consumption relates to income levels in general, but the former is a problematic definition for many reasons, and the latter does not actually coincide particularly well with the categories of goods people list off when they think of "essential goods". Humans in real life just don't respond to changing conditions the same way the little econs in your head do; they way you've decided they "should". Ever heard that humans don't "behave logically"? Yeah, that's economists with overly simplified models being annoyed that (mostly) poor people don't act the way that they've decided poor people should act. See the trend? Ask four economists write out a list of "essential goods" and you'll get five different lists. That is not how definitions work. Ask four mathematicians whether something is a Commutative Ring or not and they'll all agree. That's a definition. "Essential" does not have a definition. Its meaning shifts depending on which group the author of the Wall Street Journal op-ed you're reading wants to villainize this time.

throw0101a 1y ago

> Nvidia has current market cap equivalent to ~8 times ExxonMobil. $XOM's current revenues are known and no one will suddenly be throwing billions at them for CapEx purposes. People are throwing billions at the general direction of $NVDA. That's the difference: which company has a better change of (growing) more revenues and profits in the future? > The AI stocks nowadays are pumped up by pure hype, and it's inevitable that the market will recalibrate sooner or later And until that recalibration happens you can buy now and see your holdings go up; then, once you're happy with the ROI (10%? 20%? More?), you can sell and realize your capital gains and have a large number in your account. Or you can not buy now and potentially miss the ride up. Just because The Market™ is (allegedly) irrational does not preclude the possibility you can make money.

qalmakka 1y ago
> Just because The Market™ is (allegedly) irrational does not preclude the possibility you can make money. yeah, of course, that's how the whole deal works. I was just pointing out how most of it looked a bit crazy to me

Zigurd 1y ago

I hope this doesn't come across as pedantic and negative, but there is a good reason Why a resource extraction company in a market that topped out a few years ago has got a lower than average PE ratio. On the other hand, Nvidia is a result of the AI bubble. Oddly, though, there's a case to be made that Nvidia could come out of this, even after a correction, looking pretty good. But what I really can't grok is how Tesla keeps an insane P/E ratio after several consecutive quarters of bad news. Or how Grok gets a high valuation without even anything close to OpenAI's money-losing revenue levels, while swallowing a decrepit old social media site. Or how that big rocket can keep blowing up without dinging the valuation.

boringg 1y ago

You should probably think of it with a different perspective. The long term outlook for oil majors is stagnating at best. They provide great logistics for fuel globally but haven't expanded past that. If we continue to go to electricity and go via solar, energy storage, wind and nuclear - you end up in a spot where oil and gas are limited. NVIDIA has blue sky ahead of it -- are valuations totally out of line? Most likely. That said it has a highly desirable product globally. Oil is a valuable commodity but there are many other providers that could snatch up exxonmobil share. Also if you want a better example -- good look at any critical supplier in the food space. Thats way more important - we lose that we get in a world of hurt.

wavemode 1y ago

All you're really highlighting is the difference (from an economic perspective) between needs and wants. The world needs petroleum. But once that need is met, extra petroleum production is pointless. Whereas the world (or, perhaps, a specific class of investors within a specific segment of the world) WANTS generative AI. The amount someone wants something (and, by extension, is willing to pay for it) is potentially unbounded, and can even be uncorrelated with real utility. (See: gemstones, trading cards, cryptocurrency...)

crazygringo 1y ago

> If tomorrow ExxonMobil disappears from existence, you'd get half of the world paralysed. If Nvidia tomorrow gets replaced by a massive hole in the ground, you'd just shrug, go down the road a bit and buy AMD. That's the wrong way to think about it, because the stock price is about all future profit over time, not the current moment. Over the next 50 years, which one do you think will have made more profit? Imagine you're in the year 1900, and you're comparing a light bulb company with a steam engine company. Industry needs steam engines, you say! Half the world would paralyze if they stopped working! Meanwhile, who cares about a light bulb company? But you can understand why light bulbs actually turned out to make much more money moving forwards.

BizarroLand 1y ago
If steam engines stopped working suddenly in 1900, we would have fallen back to ooga booga cavemen in months.

dismalaf 1y ago

> Sure, they can't make cards as fast as Nvidia does They both use TSMC. If Nvidia disappeared, TSMC would have more capacity available.

neoecos 1y ago
I think the comment wasn't about production speed, but speed of the product in terms of performance
- dismalaf 1y ago
  The way it's written in English it has to refer to production speed. The context is also about economics. "Make thing as fast as" = "make" is fast. Versus "Make thing that is as fast as" = now the thing is fast. Or use a word like performant which is less ambiguous and would obviously refer to the chips. Can rephrase slightly and it's even more obvious: "I make chips faster than you". Or, "I make chips that are faster than yours".
CamperBob2 1y ago
Of course, if TSMC were to disappear, now we're talking Exxon-Mobil levels of disruption.

metrix 1y ago

you're right, but it brings up an even bigger question in my mind - If farms where wiped out we a huge percentage of the population would no longer exist, yet they 100% are a commodity with low margins. We don't value things based on long term risk/need

positr0n 1y ago

That's because businesses are valued by how much money they make, not how essential they are. ExxonMobil has a market cap essentially infinitely larger than my local water supply and the farms that grow my food.