Feb

7

It is not hard to see this is very late stages of speculative madness but I really would like to know how the risk management teams approve buying Nvidia stock here after adding $200 billion to market cap in 3 days?

Larry Williams offers:

Maybe my cycle forecast for NVDA would help:

Asindu Drileba writes:

I don't know why people are still buying Nvidia. But this is what I personally think of the stock. Nvidia has an 80% market share in the Graphics Card business. Their bread and butter used to be video gaming, 3d animation, video editing, later crypto mining, AI (computer vision), AI (Large Language Models), AI (Image generation) possible new advances may occur in Molecular Dynamics, Self driving cars etc. The CEO had an interesting interview where he talked about possible areas Nvidia may venture into.

But here is one strange thing about high performance computing (Nvidia's Niche): We would think that the better (higher performing) their products are, the less people would buy because people would do more with less right? It's actually the opposite.

— In gaming for example, when graphics cards improved people moved to less polygon looking characters and wanted more details like finer hair & plants. From there they even went to more computationally intensive algorithms like ray tracing that mimic real world scattering of light. Requiring even more compute in subsequent algorithmic advances.

— In Bitcoin, many people using Nvidia GPUs made it more difficult to earn money from crypto mining. Which requires people to have even more Nvidia GPUs just to continue earning the same income.

— In AI, when ever a new breakthrough was made, researchers often trained models with larger datasets, using more & more GPUs. Chat GPT for example was trained on 1 Trillion corpus of text.

So if they do maintain this 80% market share and these underlying industries continue to grow (and make new break throughs). It makes sense that Nvidia will be very valuable in the near or distant future. Buying now (at all time highs) is definitely dangerous but, even if the bubble pops, the underlying industries it facilitates will still be present. And if more breakthroughs in these industries are made, it makes sense that Nvidia still has some value left in it.

Cagdas Tuna responds:

Good fundamental points and there I have 2 counter outlook:

-Gaming industry; I almost everyday play an online game called Destiny 2, and their developer Bungie has reduced workforce around 10%. I know many other gaming companies are reducing/reduced workforce which doesn't give too much optimism in that area.

-Bitcoin mining; there is halving in a few weeks and this will require more powerful computers but it will also increase the cost which in the end will end up new miners losing money in most cases. Only way to maintain gains in mining is Bitcoin price to double or triple in a year.

Even on the best possible scenario it will not add 200 billion dollars worth growth in many many years.

Steve Ellison comments:

Words of wisdom from Rocky's Ghost, posted in the Spec List on April 4, 2017. And yes, I am long NVDA. I believe this is the study Rocky referred to.

Soros and I share very little. However, I have come to agree with him that the right position is to be long "bubble" (however defined). I used to subscribe to Anatoly's view and to be bearish during bubbled but I discovered that from a risk-adjusted-return perspective, it's better to be right "today" than right "tomorrow." Along this point, I read a study that shows a substantial percentage of stock returns occur during the last surge in a "bull market". If you miss this surge, it's very difficult to keep up with the indices in the short term. And in the long term, we're all dead.

Asindu Drileba replies:

Gaming Revenue was about $142B just in 2022. If cloud gaming, something Nvidia is planning todo is successful, I expect this to jump by several multipliers. I expect Cloud gaming to be a bigger business than say AWS. Gaming is really big, I believe you have heard about gaming being bigger than movies & music combined.

The Crypto market cap is $1.6T, a lot of these Crypto currencies use graphics cards to mine their currencies. So I don't think $200B is too much. For Nvidia which is well positioned in these industries, i.e., owning 80% of that market.

Humbert H. adds:

One fundamental point about predicting the future of NVIDIA. It's a complete accident (lucky for NVIDIA) that the hardware optimized matrix multiplication used for 3D graphics pipelines was also useful for AI.

K. K. Law riffs on The Great One:

Confirmation bias. And this is where the AI computation puck is at of course.

Cagdas Tuna realizes:

Now I see why everyone chasing this momentum with FOMO as all assumptions based on Nvidia will get all of the cake in the market!


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