Posted by kjhughes 18 hours ago
To me, that seems to be a requirement for the computing industry for a long time.
And, they seemed to have amassed enough capital to comfortably pivot to the next great thing that requires similar calculations.
I think this is their super power.
The next logical step would be to get into CPUs, to become a fully integrated computing solutions provider.
Sure, but they have a market cap of 5 trillion. It's about 10x that of AMD, which also sells similar silicon (and isn't in any distress). It's more than Apple, Google, and Microsoft - and these companies historically found ways to make more money than the vendors they buy chips from.
The problem isn't that Nvidia doesn't have good fundamentals or good products, it's that the market is expecting miracles.
In the case of Nvidia, the funny thing is that their high valuations started not with AI, but with cryptocurrencies. Just never really came down - they coasted from a silly hype cycle to a more substantive one. Ten years ago, NVDA wasn't an interesting stock at all.
Stock values go down when people holding stocks expect them to go down.
Tax reasons might be one as well, long term capital gains are taxed less.
There are few investors that can spend the time it takes to be active like that.
Most people buying individual stocks are better of buying ETFs anyway.
In the end it's a choice on what to spend your time on.
Except when they aren’t, see GameStop and Beyond Meat.
The problem for Nvidia is when demand doesn't continue to increase as much as expected.
When that investment firehouse gets turned off, the AI providers will stop building new data centers. Likely for some years. That revenue stream for NVIDIA will go to zero so fast…
The unknown, as with any bubble, is timing.
NVIDIA isn’t a startup. It isn’t disrupting a market. It is the ESTABLISHMENT. Low double-digit growth numbers for market leader in established industries would be, by itself tremendously remarkable. Apple was 6% last year, for example. That’s doing great.
NVIDIA grew 142% this year and 217% the year before. That’s… that’s f%#£ing unbelievable is what that is.
The entire consumer market for NVIDIA is less than 10% of their data center market. NVIDIA is a ln AI company with a side hustle in computer graphics. Oh and a nontrivial amount of that is researchers and small companies buying consumer chips for non-LLM AI training and inference, so real numbers are even smaller.
“Zero”, while not mathematically accurate, is indistinguishable here. Elimination of most of the data center sales would immediately move market valuations by trillions of dollars.
I'm sure that same phrase was echoed at Nortel and more offices in the 90s.
It's all hot stuff until you have a few billion dollars worth of inventory manufactured that you can barely give away for a million dollars one day. Sure it's not zero, but you're still pretty fucked in the end.
the current "bubble" hasn't surpassed the dot-com boom yet.
You have to compare forward earnings to share-price ratios.
What about OpenAI, Anthropic, xAI and the other foundation labs that have collectively raised trillions?
What Microsoft, Amazon, Google, and Meta, which would likely survive but maybe lose up to a trillion each in valuation?
What about the very long tail of venture-backed AI companies that will go bust? You might complain that the dotcom number was just public companies, but back in 2000 everything was a public company. A company with thousands of high-earning employees going bust matters to the greater economy whether or not it is Nasdaq listed or not.
If a single company represents the entire dollar amount of the dotcom bust, or half when inflation-adjusted, and that valuation is entirely predicated on that growth continuing at historically unprecedented rates.. yeah we're in a bubble, and the damage when it bursts is going to be big.
That was the point I was making, and I fail to see how forward earnings to share-price ratios has any relevance here. The whole point of a bubble popping is that the market suddenly finds out those forward revenues were a mirage, a house of cards, and are very much made up.
the relevance is that these earnings expectations are lower than when the dotcom bubble happened.
The fact that a single company can have a market cap today that is greater than the losses from the dotcom bust is irrelevant. We have more wealth today than back in 2000, and these market caps reflect that.
[citation needed]
https://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-ea...
The dotcom bubble peaked at around 46, while we are currently at 30. Will it grow? Who knows. But the bubble certainly isn't as big as claimed by the grandparent comment.
edit: highlight: "not not". I think it's very smart.
Buying a stake in Nokia is admittedly different than taking it over and managing it, but the danger there is very clear. Distracted management that strays away from core competence can easily kill the golden goose driving revenue.
The contrarian view is that Berkshire Hathaway is able to hold an array of successful manufacturing and service businesses (Kirby vacuum cleaners, Dairy Queen, Clayton Homes, and the prominent Sees Candy) without losing management control of GEICO and their other insurance holdings.
Hopefully, Nvidia sees the example of RCA and Gulf Western, and will not lose focus on their core competence.
RCA famously birthed the semiconductor industry in Taiwan. I think that focused trade regulation would prevent a repeat of that event in modern times.
Edit: It appears that RCA bought Coronet Carpets, not Carpetland.
They have substantial operations in North America. T-Mobile uses primarily their hardware. Nokia still operates Bell Labs which came originally from AT&T via Lucent.
As the other global options for network hardware are Ericsson, Samsung and Huawei, Nokia is the closest to a “Made in USA” solution. Its HQ is in Finland but at least it’s a NATO country now.
So they’re more important to US infrastructure than might appear at first glance.
> As the other global options for network hardware are Ericsson, Samsung and Huawei, Nokia is the closest to a “Made in USA” solution. Its HQ is in Finland but at least it’s a NATO country now.
i.e. with the current US administration, a "Made in USA" solution to critical infrasctructure would likely be seen as ideal; and viewed through this lens, when the other options come from Sweden, Finland, South Korea, and China, Finland is probably the best option.
I didn't read any implied criticism of Finland.
But only the real NATO membership significantly diminished the country risk that foreign investors correctly perceived in Finland.
That risk is lesser now thanks to NATO.
I was part of the Nokia => NSN transition, and saw that S change back from Siemens into Solutions, with the money they got back from selling Nokia Mobile to Microsoft.
They also plan to provide AI services in the Edge, that's why Nvidia invested.
But why is Ericsson(swedish), Samsung(south korean) not considered made in US in the sense that atleast south korea has strong relations with america iirc and also I just recently checked and it seems that sweden has also become a part of nato. So some of these can be just as good.
Although I still agree that Nokia might be important in general but I just wanted to point/question it out I suppose.
Per Wikipedia [1], Lucent's factories and offices are^W were situated in places like Murray Hill and Mount Olive, NJ, North Andover, MA, Reading, PA, and a bunch of other places in the US.
I think it makes^W made Nokia, which owns Lucent properties, "more US" than, say Ericsson and Samsung, until these facilities were closed.
[1]: https://en.wikipedia.org/wiki/Lucent_Technologies#Divisions
Also, why is Nokia closer to the US than Ericsson?
While there's probably a little overlap in all of their product lines with Nokia (I mean Nokia makes simple ethernet switches so that carriers can buy all their gear from one vendor), most of those companies don't really compete in the same markets as Nokia
Cisco isn't selling into T-Mobile and AT&T's customer networks. Nokia isn't selling into JPMorgan's or Walmart's IP networks
Hence my comment :)
Nokia does in fact compete with Cisco and the others, but less so than in the past.
That's an amazing trove of IP!
It's like "if your going to sell chips to China, you have to spend some of the money funding non-Chinese tech".
Nokia's capabilities to deliver 5G networks is a direct competitor to Huawei, right?
Is Nvidia functionally an strategic hedge fund of the US Government? Would this fall under Jeffrey Sach's realm?
They definitely did, Intel existing is probably an issue of national security at this point, if Intel fell then there'd be the risk of some other nation's company being part of the duopoly.
Mind elaborating? Who are the players in the duopoly?
There's hardly any non-American CPU designers out there
Risc-V moved HQs to be a non-American CPU designer, but perhaps you don't find them credible (yet).
SMIC has a DUV multi-patterning 7 nm node which is already economically uncompetitive with EUV 7 nm nodes (except for PRC subsidies) and the economics of DUV only get worse further down, but at least they're trying and will certainly be the first client to use the Chinese EUV machines, whenever those come online.
https://en.wikipedia.org/wiki/Concerns_over_Chinese_involvem...
https://www.bloomberg.com/news/features/2020-07-01/did-china...
https://www.politico.com/news/2020/02/13/us-charges-huawei-w...
If you wanted something in the x86 space it was either Intel or AMD. AMD is a direct competitor. If I was Nvidia I'd have done something about Intel. At least stop them from crashing further.
The SP500 could merge into one company, regulation permitting.
It's the owners of the Nvidia stock who potentially could trade their Nvidia stocks for the other 230 companies stocks. But then they have no Nvidia stocks anymore, on the other hand.
Nvidia just made graphics cards, at a time when games were still being written for MS-DOS. Nobody was to imagine the real money to be made from repurposing these graphics cards for crypto and now this AI 'application'.
in five years, NVDA's business strategy will be like CocaCola's, forcing bottlers to buy their syrups.
For example, if they are only two companies, say with 1T and 4T market cap. If one invests 5M into a total market ETF, 1M is allocated to company A and 4M to company B. But since company B is 4x bigger than company A, the upward price pressure is the same for both companies.
In a hypothetical market with 100% ETFs, you’d have a status quo.
Edit: maybe not, since you have ETFs that invest in, say, Nasdaq only, which is tech oriented and would influence S&P500.
If you ever played Risk, or most other games, once the snowball starts, it's hard to stop it.
Of course, since the market has never been like this before, it's a speculation...
Nvidia is using its revenues to quickly invest in bets that are simultaneously customers.
If anything, it's a triple win.
- taking advantage of cash it needs to deploy
- making new investments in areas NVidia wants to shape
- making new customers that continue to buy Nvidia GPUs, especially if they're successful
Some of these ventures may fail, but it's better than distributing dividends or issuing stock buybacks if you believe this technology will be useful in the future.
Companies doing this purely off of equity, stock valuation, and product/services agreements are even smarter as they're using pure hype to fund strategy.
Nokia today is sort of “everybody who was making networks in Europe and North America except Ericsson”.