Seems like another article based on the assumption that Nvidia just sits there doing nothing while everyone who has so far proven unable to compete suddenly figures it out and steals their lunch.
At some point one of these Nvidia doomers will be right but there is a long line of them who failed miserably.
I'm skeptical of this. They have been doing this for a decade already. So far, those same companies have just become bigger and bigger customers of NVIDIA.
NVIDIA is very strategic about building product to avoid commodification -- both by building out network effects where software is tied to their proprietary sdk libraries, and by always focusing on being at the cutting edge of product.
Both these things can be true: a large company should try to build their own hardware to reduce supplier risk, and a large company should be open to suppliers that have better product that delivers business value.
So far, these large companies' internal hardware has been useful internally but never a complete replacement for NVIDIA, which keeps staying at the cutting edge of new capabilities.
NVIDIA already faced existential risk when Intel was commodifying all the dedicated motherboard components in the late 90s, 2000s, (like sound cards etc), so they're hyper-aware of this.
NVIDIA ain't spent much time in the NFL else they would've known "...when you’re bleeding a guy you don’t squeeze him dry right away. Contrarily, you let him do his bidding suavely. So you can bleed him next week and the week after at minimum."
It's true, predicting Nvidia's downfall has become a recurring theme. It's easy to underestimate a company that consistently adapts and innovates. Maybe the narrative isn't about "stealing their lunch" but rather carving out specialized niches.
Actually, it doesn't. Everyone who saw the recent GTC knows about what they're planning to launch - what people do not get is that with the economic slowdown and price premium, everyone is looking to get more out of their current investments and the premium does not exist anymore.
Fair Disclosure: I am very neutral when it comes to FLOPS/W/$ and the generality of those FLOPS. Given inference and training, the advantage is slipping.
One of the most important contributors to QC is Nvidia because they try to help with GPUs in creating SW for QC and simulations. Nvidia has cuda quantum for years now.
Interesting, Marvell is actually down over 50% this year. I just don't understand the bear case at all. I'm a nobody and I'm still willing to buy a $1500 gpu, and that GPU still can't do what the cloud does. The next $1500 gpu probably can't either. It feels like we're over thinking this. The hardware roll-out is all there is imho. Jensen has mentioned he sees Nvidia being a 10 trillion-dollar company, and I'm willing to meet him half-way with my faith here.
Edit:
- I wonder what's stopping Nvida from releasing an AI phone
- A LLM competitor service (Hey, how about you guys make your own chips?)
- They are already releasing an AI PC
- Their own self driving cars
- Their own robots
If you mess with them, why won't they just compete with you?
Just wanted to say one more thing, that Warren Buffet famously said he regretted not investing in both Google and Apple. I think something like this is happening again, especially as there are lulls that the mainstream public perceives, but enthusiasts don't. To maintain the hyperbole, if you are not a full believer as a developer, then you are simply out of your mind.
>I wonder what's stopping Nvida from releasing an AI phone
It's a low margin business and would hurt the balance sheet more than the completely irrelevant revenue from a project like that.
I've been investing in semi for decades and what strikes me about this recent cycle is that so many don't seem to understand that semi is a highly cyclical business that is prone to commoditization waves and inventory/capacity overbuild.
And speaking as a trader, instead of reinforcing your firmly held base case, I'd strongly consider painting out the bear cases. Look at the roadmaps of the hyperscalers that are designing their own chips for internal use, etc. And never use the word faith when it comes to markets.
You could easily see NVIDIAs margins get chopped down, and see the multiple re-rate lower from here. Actually, I'd argue the name is well on the way down this path already.
It's almost guaranteed to happen sooner or later. Semi down cycles are usually brutal for semi equities.
That's not to say it isn't a great company. It's certainly not a Buffett name though.
One thing you have to consider is that these other non-hardware dedicated companies have to continuously create new generations of AI chips. You can't sit on the M3, or the Google TPUs, you have to keep making new and better ones. How many companies think they can do this stuff in-house and then eventually realize that they are better off relying on a dedicated vendor? One or two leadership changes and they will cut these initiatives entirely (ask the Zuck about the Metaverse), but Nvidia's whole purpose is to make GPU hardware so they can never truly cut their heart out.
The cyclical stuff was the argument made for semis during the 2010s when no one gave a shit about semis really. I think the game changed, but again, I do operate on faith, or in investor terms, conviction. The main evidence for why the game has changed to me (well, other than AI being the most incredible piece of tech we ever built) is mostly that there are companies that have no business making chip hardware now interested in making chip hardware. That's not usually part of the cycle.
I generally feel that many have hard time separating scenarios of company dying and going to bankruptcy and not being as profitable as before and thus being less valuable.
One is often unrealistic and later one is lot more common. And one really should consider later one in long term investments.
> I wonder what's stopping Nvida from releasing an AI phone
B2C is a hellish headache that has marginal returns if you are not B2C first, and the amount of investment needed to be B2C competent just isn't worth it when there are alternative options to invest in
> A LLM competitor service (Hey, how about you guys make your own chips
Already exists. AI Foundary
> They are already releasing an AI PC
It's just an OEM rehash
> Their own self driving cars
Not worth the headache and also losing customers like Google or Amazon due to competitive pressure
------
Cannot reply: releasing their own "Nvidia Car" means they will lose their existing automotive partners becuase they will not spend on a competitor. Same reason Walmart stipulates EVERY tech vendor must decouple from AWS when selling to them.
> Walmart stipulates EVERY tech vendor must decouple from AWS when selling to them.
I'm curious to know more about this if you (or anyone else) can elaborate on it.
What constitutes a tech vendor? Are you talking about Walmart buying PCs from Dell, from buying/renting a SaaS from someone, from IT-consulting coming in to do a one-time service for them (even if that service takes years)?
You're not talking about stuff like "Apple wants to sell iPhones to Walmart customers", I assume - yes?
Gaming was sort of their major thing until the cryptocurrency wave gave them a major boost and GPUs were rare luxuries suddenly. But as crypto was fading and GPUs were suddenly becoming affordable, GenAI wave hit and again gave a major boost. Am curious how they will react to quantum(sadly no magical enterprise application apparent yet so the tail wind is not strong).
They'll do ~$110 billion in operating income over the next four quarters, with a mere 36,000 employees and no meaningful dividend or debt to maintain. I think they can trivially afford to keep trying if they see a market.
I didn’t realize Marvell stock was down so much. I would’ve thought that there might’ve been an explosion in training and the need for ssd’s (Marvell makes controllers for enterprise drives iirc), and that Marvell would be doing well. NAND drive prices for consumers are a good amount from their lows from 2023, I figure if ssd’s weren’t moving for consumers, maybe datacenters and enterprise were gobbling them up.
Anyway, maybe marvell should focus more on the the consumer side since hobbyists seem to be building crazy ai rigs and likely needs drives, at the very least, for models. It sort of seems like hobbyists are devouring any worthy gpu that gets produced.
I agree the concern here about Nvidia's long term viability seems overblown.
WRT your edit: The answer to all of this is that it's very hard and requires a huge amount of investment to produce good vertical solutions in each of these spaces. You cannot build a good AI phone without first building a good phone. You cannot build a self-driving car without starting with a good car, etc. For robots, I'll point you to someone using Nvidia chips: the Matic is a complete ground-up rethink of how robot vacuums should work. It's taken them 7 years to get to early adopter phase.
> I just don't understand the bear case at all. I'm a nobody and I'm still willing to buy a $1500 gpu, and that GPU still can't do what the cloud does.
Agreed, and for all the "price crash" I still can't just whip out my credit card and purchase an hour or two on an H100/B100.
It's still multi-year contracts and "Contact Sales".
Because Nvidia focuses on being a partner in each industry you mention.
See it that way, if you have an OS/SW for all the industries you mention then who is your competitor? Not the participants in that industries. Nvidia can partner with any automotive company but won't compete with any of them as long as they don't build cars. But imagine the potential of every self driving car being build using Nvidia AI?
Think about the potential of every robot build using Nvidia AI?
Think about the potential of any AI Service using Nvidia AI?
See, Nvidia isn't directly competing in the enduser market but instead focuses on the B2B. Nvidia can also create many different revenue streams from 1 customer.
For example an automotive customer:
- Nvidia HW in car for AI
- Nvidia data center on-prem/cloud for DriveSim in car
- Nvidia Omniverse for car design and manufacturing simulation
- Nvidia Isaac for robotics/logistics in manufacturing plant
- Nvidia Cosmos+GR00T for robots inside the plant
- Nvidia edge devices inside any robot in the plant
- Nvidia NeMo data center on-prem/cloud for AI models / LLMs for internal use
And what will be the advantage? Nvidia can actually make it more and more seamless to operate between all Nvidia solutions. For example, you can do an update to your robots in Cosmos, simulate it in Omniverse and with 1 click update your Nvidia driven real robots. The alternative is that you have 3 solutions from 3 different vendors with no interface between them.
People have no idea, what Nvidia is actually creating. Nvidia has more SW engineers and even Nvidia employees call Nvidia an AI SW company. They publish so many libs and lots of other SW stuff that it's sometimes hard to keep up. Just look at all the RTX goodies for gamers which Nvidia is developing. And they are all free, well except that you need Nvidia HW for it. The same model, Nvidia will apply to ALL industries in the world. And here they discuss about CSPs being an issue for Nvidia while Jensen focuses to build a Mega Corp. which potential TAM is in every industry in the world :)
This is what will help protect Nvidia now that DC and cluster spend is cooling.
They own the ecosystem thanks to CUDA, Infiniband, NGC, NVLink, and other key tools. Now they should add additional applications (the AI Foundry is a good way to do that), or forays into adjacent spaces like white-labeled cluster management.
Working on building custom designs and consulting on custom GPU projects would be helpful as well by helping monetize their existing design practice during slower markets.
Of course, Nvidia is starting to do both, with Nvidia AI Foundry for the former and is working on the latter by starting a GPU architecture and design consulting as announced at GTC and under McKinney
> Working on building custom designs and consulting on custom GPU projects would be helpful as well by helping monetize their existing design practice during slower markets.
Apart from Nintendo, who has successfully partnered with Nvidia? Apple, Microsoft and Sony have all been burnt in the past.
National Labs (kinda), a big pharma company I don't think I can disclose, and a couple HFTs, but it's a muscle they will need to build out, because Broadcom are Marvell are eating their cake.
Nvidia has started formalizing that last year [0], but it's a new muscle for them.
Yeah, that immediately came to
mind—they talk about distributed systems being a problem, but Nvidia owns the battle-tested and well-regarded HPC networking hardware (Infiniband).
There’s maybe some wiggle room, in that these AI distributed systems might not (?) look like HPC/scientific computing systems—maybe they don’t need Infiniband style low latency. So these other funky networks might work.
But like, Nvidia has the good nodes and the good network. That’s a rough combination to compete against.
> While the H100 generation likely represents peak pricing power (new B200s have lower margins and higher COGS), an immediate lack of alternatives means they’ll continue to print cash.
That's not a trend yet. We're about to enter an era where most media is generated. Demand is only going to go up, and margins may not matter if volume goes up.
> The open question is long-term (>6yrs) durability1. Hyperscalers (Google, Microsoft, Amazon, and Meta) are aggressively consolidating AI demand to become the dominant consumers of AI accelerators; while developing competitive, highly-credible chip efforts.
Hyperscalers aren't the only players building large GPU farms. There are large foundation model companies doing it too, and there are also new clouds that offer compute outside of the hyperscaler offerings (CoreWeave, Lambda, and dozens of others). Granted, these may be a drop in the bucket and hyperscalers may still win this trend.
I am starting to think AMD is doing this on purpose and they have some secret handshake deal with Nvidia. Nvidia has at least two more years of “sellout at any price” market. Not because they have the best solution (which they do atm) but because they basically share the monopoly with Apple at TSMC. And Apple is content wasting that away on iPhones.
The author completely underestimates NVIDIA's strategic position. They don't need to win the hardware game forever - they're building the entire AI stack: hardware, networking, software, models, developer tools. Nobody else is doing this comprehensively. While hyperscalers are making custom chips for their own use cases, NVIDIA is building a unified platform that everyone else will use. This isn't about who makes the best GPU, it's about who builds the ecosystem that becomes the industry standard.
Actually, Nvidia has already built the ecosystem. Now, they are refining and adapting it to the fast research in AI.
Others talk about chips when Nvidia thought about interconnects 8 years ago. Today, competitors try to catch up on this while Nvidia talks about One Giant GPU.
The next step will be scale up and then scale out.
Nvidia is always ahead because what the article fails to see is that where CSPs are today is where Nvidia was in the last decade. Nvidia has a working ecosystem for everyone which they can now fine tune with actual customers.
How can it be "slipping" if they sell out of all their stuff years in advance? I still can't find any sanely priced 5090s. And before you point out that 5090s are not their main revenue driver, they're sold out of H100s and so on years in advance, too.
They are losing their biggest customers to custom in-house silicon, and smaller orders are going to compete with a market being flooded by superfluous hardware from companies which either went bust due the the AI bubble shrinking, or went bust because they weren't able to compete with the big fish.
I don't think they even wanted to be in the crypto mining market. They artificially hobbled their GPUs specifically so that they wouldn't perform well there.
The AI market will be drastically larger in 10-15 years, not smaller. The bubble aspects of the present will be trivial compared to the long-term result, as with the dotcom bubble. Google all by itself is worth more today than all the combined dotcoms in existence in 1999.
Readit News
At some point one of these Nvidia doomers will be right but there is a long line of them who failed miserably.
The article explains that Nvidia's biggest customers (50% of datacenter revenue) are switching to their own hardware.
NVIDIA is very strategic about building product to avoid commodification -- both by building out network effects where software is tied to their proprietary sdk libraries, and by always focusing on being at the cutting edge of product.
Both these things can be true: a large company should try to build their own hardware to reduce supplier risk, and a large company should be open to suppliers that have better product that delivers business value.
So far, these large companies' internal hardware has been useful internally but never a complete replacement for NVIDIA, which keeps staying at the cutting edge of new capabilities.
NVIDIA already faced existential risk when Intel was commodifying all the dedicated motherboard components in the late 90s, 2000s, (like sound cards etc), so they're hyper-aware of this.
The article seems focused more on stock price and where to bet, than the market for GPUs or generic hardware vendors.
Fair Disclosure: I am very neutral when it comes to FLOPS/W/$ and the generality of those FLOPS. Given inference and training, the advantage is slipping.
Dead Comment
Edit:
- I wonder what's stopping Nvida from releasing an AI phone
- A LLM competitor service (Hey, how about you guys make your own chips?)
- They are already releasing an AI PC
- Their own self driving cars
- Their own robots
If you mess with them, why won't they just compete with you?
Just wanted to say one more thing, that Warren Buffet famously said he regretted not investing in both Google and Apple. I think something like this is happening again, especially as there are lulls that the mainstream public perceives, but enthusiasts don't. To maintain the hyperbole, if you are not a full believer as a developer, then you are simply out of your mind.
It's a low margin business and would hurt the balance sheet more than the completely irrelevant revenue from a project like that.
I've been investing in semi for decades and what strikes me about this recent cycle is that so many don't seem to understand that semi is a highly cyclical business that is prone to commoditization waves and inventory/capacity overbuild.
And speaking as a trader, instead of reinforcing your firmly held base case, I'd strongly consider painting out the bear cases. Look at the roadmaps of the hyperscalers that are designing their own chips for internal use, etc. And never use the word faith when it comes to markets.
You could easily see NVIDIAs margins get chopped down, and see the multiple re-rate lower from here. Actually, I'd argue the name is well on the way down this path already.
It's almost guaranteed to happen sooner or later. Semi down cycles are usually brutal for semi equities.
That's not to say it isn't a great company. It's certainly not a Buffett name though.
The cyclical stuff was the argument made for semis during the 2010s when no one gave a shit about semis really. I think the game changed, but again, I do operate on faith, or in investor terms, conviction. The main evidence for why the game has changed to me (well, other than AI being the most incredible piece of tech we ever built) is mostly that there are companies that have no business making chip hardware now interested in making chip hardware. That's not usually part of the cycle.
One is often unrealistic and later one is lot more common. And one really should consider later one in long term investments.
B2C is a hellish headache that has marginal returns if you are not B2C first, and the amount of investment needed to be B2C competent just isn't worth it when there are alternative options to invest in
> A LLM competitor service (Hey, how about you guys make your own chips
Already exists. AI Foundary
> They are already releasing an AI PC
It's just an OEM rehash
> Their own self driving cars
Not worth the headache and also losing customers like Google or Amazon due to competitive pressure
------
Cannot reply: releasing their own "Nvidia Car" means they will lose their existing automotive partners becuase they will not spend on a competitor. Same reason Walmart stipulates EVERY tech vendor must decouple from AWS when selling to them.
I'm curious to know more about this if you (or anyone else) can elaborate on it.
What constitutes a tech vendor? Are you talking about Walmart buying PCs from Dell, from buying/renting a SaaS from someone, from IT-consulting coming in to do a one-time service for them (even if that service takes years)?
You're not talking about stuff like "Apple wants to sell iPhones to Walmart customers", I assume - yes?
I've tried explaining that one or two AI data center clients for Nvidia dwarfs the entire gaming GPU market, but he just doesn't get it.
Did you know that Nvidia has a gaming cloud running which might become the largest in the world at some time?
In 10-20 years, Nvidia might make more revenue from gaming cloud than they do today with gaming HW.
Anyway, maybe marvell should focus more on the the consumer side since hobbyists seem to be building crazy ai rigs and likely needs drives, at the very least, for models. It sort of seems like hobbyists are devouring any worthy gpu that gets produced.
WRT your edit: The answer to all of this is that it's very hard and requires a huge amount of investment to produce good vertical solutions in each of these spaces. You cannot build a good AI phone without first building a good phone. You cannot build a self-driving car without starting with a good car, etc. For robots, I'll point you to someone using Nvidia chips: the Matic is a complete ground-up rethink of how robot vacuums should work. It's taken them 7 years to get to early adopter phase.
More like you cannot build a self-driving car without starting with a good phone. See Huawei.
Agreed, and for all the "price crash" I still can't just whip out my credit card and purchase an hour or two on an H100/B100.
It's still multi-year contracts and "Contact Sales".
See it that way, if you have an OS/SW for all the industries you mention then who is your competitor? Not the participants in that industries. Nvidia can partner with any automotive company but won't compete with any of them as long as they don't build cars. But imagine the potential of every self driving car being build using Nvidia AI?
Think about the potential of every robot build using Nvidia AI?
Think about the potential of any AI Service using Nvidia AI?
See, Nvidia isn't directly competing in the enduser market but instead focuses on the B2B. Nvidia can also create many different revenue streams from 1 customer.
For example an automotive customer: - Nvidia HW in car for AI - Nvidia data center on-prem/cloud for DriveSim in car - Nvidia Omniverse for car design and manufacturing simulation - Nvidia Isaac for robotics/logistics in manufacturing plant - Nvidia Cosmos+GR00T for robots inside the plant - Nvidia edge devices inside any robot in the plant - Nvidia NeMo data center on-prem/cloud for AI models / LLMs for internal use
And what will be the advantage? Nvidia can actually make it more and more seamless to operate between all Nvidia solutions. For example, you can do an update to your robots in Cosmos, simulate it in Omniverse and with 1 click update your Nvidia driven real robots. The alternative is that you have 3 solutions from 3 different vendors with no interface between them.
People have no idea, what Nvidia is actually creating. Nvidia has more SW engineers and even Nvidia employees call Nvidia an AI SW company. They publish so many libs and lots of other SW stuff that it's sometimes hard to keep up. Just look at all the RTX goodies for gamers which Nvidia is developing. And they are all free, well except that you need Nvidia HW for it. The same model, Nvidia will apply to ALL industries in the world. And here they discuss about CSPs being an issue for Nvidia while Jensen focuses to build a Mega Corp. which potential TAM is in every industry in the world :)
This is what will help protect Nvidia now that DC and cluster spend is cooling.
They own the ecosystem thanks to CUDA, Infiniband, NGC, NVLink, and other key tools. Now they should add additional applications (the AI Foundry is a good way to do that), or forays into adjacent spaces like white-labeled cluster management.
Working on building custom designs and consulting on custom GPU projects would be helpful as well by helping monetize their existing design practice during slower markets.
Of course, Nvidia is starting to do both, with Nvidia AI Foundry for the former and is working on the latter by starting a GPU architecture and design consulting as announced at GTC and under McKinney
No they do not. The article explains that Google, Amazon, Microsoft, and Meta are developing their own hardware and software for AI/HPC.
Google Gemini was not trained using CUDA or Nvidia hardware.
Chinese CSPs are the only ones can develop their own hardware / software for AI / HPC.
Apart from Nintendo, who has successfully partnered with Nvidia? Apple, Microsoft and Sony have all been burnt in the past.
Nvidia has started formalizing that last year [0], but it's a new muscle for them.
[0] - https://www.reuters.com/technology/nvidia-chases-30-billion-...
There’s maybe some wiggle room, in that these AI distributed systems might not (?) look like HPC/scientific computing systems—maybe they don’t need Infiniband style low latency. So these other funky networks might work.
But like, Nvidia has the good nodes and the good network. That’s a rough combination to compete against.
Deleted Comment
That's not a trend yet. We're about to enter an era where most media is generated. Demand is only going to go up, and margins may not matter if volume goes up.
> The open question is long-term (>6yrs) durability1. Hyperscalers (Google, Microsoft, Amazon, and Meta) are aggressively consolidating AI demand to become the dominant consumers of AI accelerators; while developing competitive, highly-credible chip efforts.
Hyperscalers aren't the only players building large GPU farms. There are large foundation model companies doing it too, and there are also new clouds that offer compute outside of the hyperscaler offerings (CoreWeave, Lambda, and dozens of others). Granted, these may be a drop in the bucket and hyperscalers may still win this trend.
But to your point, Disney is using GenAI in their new live action Moana film. Presumably that'll do lots of sales.
Others talk about chips when Nvidia thought about interconnects 8 years ago. Today, competitors try to catch up on this while Nvidia talks about One Giant GPU.
The next step will be scale up and then scale out.
Nvidia is always ahead because what the article fails to see is that where CSPs are today is where Nvidia was in the last decade. Nvidia has a working ecosystem for everyone which they can now fine tune with actual customers.
Not ideal for them but hardly a death blow
They are losing their biggest customers to custom in-house silicon, and smaller orders are going to compete with a market being flooded by superfluous hardware from companies which either went bust due the the AI bubble shrinking, or went bust because they weren't able to compete with the big fish.
Deleted Comment
Gaming is only 7% of Nvidia's revenue.