Yeah personally I still find the AI technology very impressive but ultimately it has to deliver return on investment on a large scale to a lot of companies to justify AI companies investing perhaps hundreds of billions of dollars which in turn is what is generating the incredible rise of nVidia’s revenue, profits and stock price. And it’s really not clear that companies are finding that much return from their AI spending as yet.
In the medium term nVidia also faces a significant threat of their biggest customers like Google and Amazon backward integrating into designing their own AI chips something they are already doing to some extent and also the threat of Chinese chip manufacturers over the next 5-10 years.
And none of these threats have to be fatal. The markets are pricing a lot of growth in NVidia’s stock and it would only take a moderate slowdown in growth to cause a big correction in the price.
In their in-house R&D, they use GPUs to create virtual worlds and scenarios (warehouses, etc.) to run millions of ML iterations to pre-train robots in those virtual worlds to learn their physics, maneuvering, etc., all in software, to give the physical robots an edge before they’re even “born”. That’s just stuff they’ve publicly announced. And the consumer product they announced can help run on-device ML vision etc. models.
I don’t own any Nvidia stock, so I’m not trying to hype them up or anything… they’ve just been around for quite a while and have successfully out-competed many peers in several fields, not just AI. That takes more than fast chips and good timing. Not many folks expected Intel (or IBM, for that matter, who’s now trying to make a comeback) to become irrelevant and Nvidia to become so dominant… it’s a ruthless industry, and Nvidia had to take many big risks along the way.
None of that disproves that their stock is immensely over-valued right now because of the crazy bubble. It’s just that I hope Nvidia the company survives even after an AI crash or two… if only because GeForce Now is so life-changing.
I haven’t read the entire thread so perhaps I am being redundant, but the reason is simple. The market believes that Nvidia has a lot of rich customers (AI companies) who will pay high prices for the products. So they expect Nvidia to charge a premium and make lots of money. Since the barriers to entry in this business are so high, the market thinks the high prices will continue for a while. Hence, high stock prices.
I think the market reaction to the latest quarterly statement shows how insanely high the expectations for Nvidia are. 50+% growth for a company that large is sensational and yet the initial market reaction was negative.
What’s even more interesting is the apparent concentration of their customers. While it’s just one quarter, this article highlights this. It also comments on some lack of transparency in their financial reporting.
Customer A” made up 23% of total revenue, and “Customer B” comprised 16% of total revenue, according to the company’s second-quarter filing with the Securities and Exchange Commission.
Wow, that must be one hell of a gaming PC they’re building.
The first step in AI is to match the number crunching capability of the human brain. The Intel X86 CPU architecture has been the basis for PC’s since the 1980’s. It has been tweaked and enhanced for the last 50 years or so. It has so much baggage after all that time that it is just not up to the task of brain emulation. NVDA has a CPU that can do it.
The next step in AI is to raise a newborn baby that is different from everybody else in a society that does not really like it. Once it becomes a responsible adult, you have artificial intelligence.
The outlandish power requirements we see these days show that the number crunching capability is just barely there.