Feb

29

Nvidia Hits $2 Trillion Valuation on Insatiable AI Chip Demand

The chips are so valuable that they are delivered to the networking company Cisco Systems by armored car, said Fletcher Previn, Cisco’s chief information officer, at The Wall Street Journal’s CIO Network Summit this month.

H. Humbert is skeptical:

This won't end well, but I have no idea about the timing. I have a mixed record on predicting the future, so my prediction is worth what you paid for it, but this is what's likely to happen: due to the chip shortage (the TSMC bottlenecks described aren't easily solved in the short term) and their high prices, NVIDIA's hold on the software stack will be punctured. Someone will say "Hey, we need a second source, it's not good to just have one supplier". Once that happens their monopoly will be over, and it will deflate. Are there any signs of this today? No, none.

Asindu Drileba writes:

Nvidia's edge will evaporate if there is a breakthrough in a new AI paradigm that is not as computationally intensive as deep learning. Herding exists in research just as it does in markets. As of today, researchers are herding on deep learning because it is what has shown a great track record so far. But it is clearly known that there are better (but unarticulated) ways to build systems that exhibit the properties of Artificial Intelligence that industry wants to use to solve problems. As long as these techniques are not yet developed. I still see a growing market for someone like Nvidia in the long term.

H. Humbert adds:

Nvidia will see a growing market for a long time to come, the point is they're not levitating due to durable hardware advantages but because nobody wants to abandon their CUDA toolkit. Not yet, but some day someone will diversify for any number of reasons. They will still remain king of the hill, but cracks will develop.

Humbert H. comments:

Von Neumann latency and huge power consumption are issues and will eventually be a big enough problem. It is a know problem. If not solving the problem organically, I am sure they are looking out to buy the solutions if there are viable solutions. Don't know when it happens but will happen.

Jensen Huang's speech in 2011 about failure and changing course quickly. Sounds like a trader mindset.

Some alternate techniques are being developed but most of the average Joes don't know that yet. Speaking from my observation of what are happening, not just sheer speculations. This conference ISSCC - International Solid-State Circuits Conference on solid state device held this week at SF definitely covered areas related to high speed solid state device advances, limitations and solutions. The published papers and abstracts should have the most updated information.

Yelena Sennett is skeptical, too:

As long as Nvidia are buying their own chips, their sales will keep growing, especially if they keep recording it as revenue before delivery, lol. Scott McNealy's famous 'What were you thinking?' rant to investors for bidding Sun Microsystems' stock price up to 10x sales during the DotCom bubble:

At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don't need any transparency. You don't need any footnotes. What were you thinking?

It’s not different this time - trading around ~ 30 times sales! The only question is if the market is different this time and NVDA is just one stock that will not affect the general market when it goes down back to reality of $200 - $300.


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