I understand Nvidia is in a very dominant position. But $4T market cap still seems absolutely insane to me. I've only read about the Cisco boom and bust during the Internet era, and this feels eerily similar (people who actually experienced it might feel differently though).
What could actually drag Nvidia down and make them spend decades in the dark like Cisco still does? So far the two things I've come up with are: (a) general disillusionment in AI and companies not being able to monetize enough to justify spending on GPUs. (b) Big companies designing their own chips in-house lowering demand for Nvidia GPUs.
I don't think Nvidia can counter (a), but can they overcome (b) by also offering custom chip design services instead of insisting on selling a proprietary AI stack?
blitzo · 8m ago
If China finally figured out how to make whatever machines ASML does, that the sell signal for NVDA.
fckgw · 16m ago
Also just LLMs getting more efficient in general can lead to the end of the GPU buying frenzy
Ologn · 7m ago
Nvidia stock (which I thought about buying in 1992 and didn't, unfortunately) doubled in 1990, tripled in 1991, doubled in 1992, and kept going up every year - in 1995 it doubled, in 1998 it doubled, in 1999 it doubled. So it had a long run (and is also still worth over $250 billion).
The monetary push is very LLM based. One thing being pushed that I am familiar with is LLM assisted programming. LLMs are being pushed to do other things as well. If LLMs don't improve more, or if companies don't see the monetary benefits of using them in the short/medium term, that would drag Nvidia down.
Nvidia has a lot of network effects. Probably only Google has some immunity to that (with its TPUs). I doubt Nvidia will have competition in training LLMs for a while. It is possible a competitor could start taking market share on the low end for inference, but even that would take a while.
mg · 6m ago
Over time, will humans turn all of planet Earth into an active system?
If so, the total addressable market of Nvidia might be pretty big.
Let's take the human body as a point of reference. The weight of the human brain makes up about 2% of the human body.
Earth weighs in at about 10^26 kg. 2% of that is about 10^24 kg.
All computer hardware on planet Earth weighs what? Maybe a billion computers times 10 kg? That would be 10^10 kg.
So we still have to up that by a factor of 10^14.
Still 99.9999999999% of the way to go.
chubot · 1h ago
One meta-lesson is probably that sustained effort by the same people or same culture matters
i.e. maybe you need “two hits” to become this big, separated by ~2 decades
For nvidia, it was graphics and then programmable GPUs (CUDA)
For Apple, it was GUI desktops and music players/phones
Google is up there, but I’d argue it’s closer to “one hit”, and limited by the founders stepping back and turning the company into an investment conglomerate, rather than being mission-based
When the founders leave, efficiency and creativity seem to be slowed by competing factions of upper management, often working at cross purposes
I’d say that in the best cases, institutional knowledge can build over 2 decades, but it’s also very possible to lose it
bayarearefugee · 1h ago
Another lesson is to try to be incredibly lucky.
I'm not suggesting this is all luck, Nvidia has executed very well and their early investments in programmable GPUs really paid off as a result, but a lot of their insane valuation now is due to crypto and then LLMs which are basically two back to back once in lifetime goldrushes where Nvidia happened to be the best positioned shovel seller.
You can run a company well to prepare to ride such a wave should it appear, but you've also got to be born with horseshoes up your ass for this to work out as well as it has for Nvidia
hn_throwaway_99 · 51m ago
The other thing I find interesting is that Jensen Huang has said that he wouldn't do it all over again. That is, knowing how hard it is now to build a startup, he wouldn't do it again.
I find this pretty crazy given that (at least for now) NVidia is the most successful startup of all time. Imagine the millions of other entrepreneurs, many of whom worked just as hard, who completely failed in the process.
LarsDu88 · 40m ago
I think Nvidia's market development efforts have meant more than its culture. Ever since Nvidia started moving towards general purpose compute with the 8800 GPU back in the mid 2000s, it's been actively growing markets - first in research (leading to AI advances), and now in autonomous driving, world simulation, biotechnology, and robotics.
The market for compute is endless, and Nvidia makes huge efforts to commoditize the software side of things so people can buy hardware.
dachworker · 1h ago
NVIDIA put a lot of effort into making their hardware and accompanying software useful and usable. CUDA by itself might have never got any attention if not for the effort that NVIDIA puts into helping their customers use their technology, effectively. And they are by no means perfect at it. Most of their products are a horrible mess and they often have 7 different ways to do the same thing. A lot of their libraries are closed source and you're forced to use an API that links to a black box. There's lots to complain about.
floxy · 1h ago
Amazon ($2.3T)? Microsoft ($3.7T)? Meta ($1.8T)?
xrendan · 56m ago
Amazon - Ecommerce (1994), AWS (2006)
Microsoft - Programming Language (1975), Operating Systems (1981), Office Suite (1983)
Meta - Facebook (2004), Instagram (2010)
I would argue microsoft is unique because of how badly IBM screwed up.
0xcafefood · 53m ago
Microsoft also has Azure and its gaming division.
nativeit · 34m ago
Crazy what a near total lack of anticompetitive regulatory enforcement can do for a monopoly’s value, amirite?
jahsome · 53m ago
Books and AWS
EEE and owning the soul of every customer
Facebook and cool zuck
LarsDu88 · 43m ago
To think the entire company could have failed multiple times in the 90s if not for Sega's CEO bailing Nvidia out after Sega fucked up the Dreamcast contract.
And even if Nvidia had won that contract, the Dreamcast ultimately failed. Nvidia was close to destruction multiple times in its early years.
lvl155 · 23m ago
I thought Apple would drive it to the ground after their fallout considering how Jobs handled things. Nvidia rode that crypto wave and AI was there at the very end of that rainbow. Having said that, they kept at CUDA all these years even before pandemic. They earned it 100%!
nativeit · 38m ago
Time for some grossly oversimplified back-of-the-proverbial-envelope value crunching! I’ll assume the average GPU price, for the sake of argument, is $1000. Let’s also assume their per-unit profit margin is roughly 30% (I found conflicting numbers for this on a casual search, esp. between figures that measure quarterly and annual income, I suppose it isn’t a surprise that their accountants frequently pull rabbits from hats).
Nvidia would need to move on the order of 4,000,000,000 units to hit $4T in revenue, more than triple that to realize $4T in profits. Even if the average per-unit costs are 2-3x my estimated $1k, as near as I’ve been able to tell they “only” move a few million units each year for a given sku.
I am struggling to work out how these markets get so inflated, such that it pins a company’s worth to some astronomical figure (some 50x total equity, in this case) that seems wholly untethered to any material potential?
My intuition is that the absence of the rapid, generationally transformative, advances in tech and industry that were largely seen in the latter half of the 20th-century (quickly followed with smartphones and social networking), stock market investors seem content to force similar patterns onto any marginally plausible narrative that can provide the same aesthetics of growth, even if the most basic arithmetic thoroughly perforates it.
That said, I nearly went bankrupt buying a used car recently, so this is a whole lot of unqualified conjecture on my part (but not for nothing, my admittedly limited personal wealth isn’t heavily dependent on such bets).
petsfed · 17m ago
Thing is, NVIDIA ships waaaay more than GPUs. Or, perhaps more accurately, NVIDIA ships chips. Other manufacturers install those chips. Sitting in my office right now, I have 5 computers, and between them I'd estimate I have 15 NVIDIA chips, minimum. Maybe more, I haven't carefully examined my NVIDIA-based, ASUS-manufactured graphics card to see how many name-brand chips it has.
That's to say nothing of all the other products and services they build. I just visited their website, clicked on "solutions" at the top, and there's waaaay more there than just desktop GPUs. And its worth noting that NVIDIA doesn't manufacture or sell any of the down-market NVIDIA-based boards.
Given NVIDIA's role in data centers, I think the 4T market cap is, while probably still somewhat inflated by speculation, not so inflated as to be a bubble ready to pop.
wredcoll · 31m ago
It seems fairly obvious, to me, that the issue is that most people make money from the stock price changing rather than from any kind of intrinisic value of the underlying company.
In other words, why should it matter to me what the company's profit margin or asset base or what not is actually worth when I make money if the stock number goes up?
scottiebarnes · 25m ago
NVDA's current forward P/E ratio (price to earnings) is about 37.
That means if we hold constant the profit earnings, if you bought the whole company at its current valuation ($4tr), it would take you 37 years to break even.
Is this reasonable? Depends on sector and growth potential. To me, this is a "fair" valuation and not overly inflated based solely on existing earnings.
nativeit · 7m ago
I can understand that, at least in theory. I feel like this is one of the only contexts where markets accommodate long-term thinking, which frustrates my own sensibilities. Thanks for the add’l perspective.
Spinnaker_ · 24m ago
You are way off. A single B200 costs $70k. They sell them in racks for over $3mm each. And they have 55% net profit margin.
nativeit · 13m ago
How many racks are they selling? Is that 50% of their revenue? 10%? How sustainable will that be? I understand AI will probably continue to grow, but can they continue cornering such a market with 55% margins?
Fortunately, I opted to pivot towards ratio of total equity, the per-unit activity was a very rough attempt at moving away from abstractions, and that is obviously one of the many flaws in such an exercise.
I already noted the profit margins are incredibly unstable, so I don’t trust the reported figures where they quadrupled inside of a decade. I’m not suggesting it isn’t real, only that it isn’t possible to pin that 55% down as sustainable for any significant period of time, certainly not the 30-50 years is it would take to realize $4T of value at their current pace.
Spinnaker_ · 2m ago
It's close to 90% of their revenue. They will sell about $115B this year, $180B in 2026 and $230B in 2027, with margins staying fairly constant. Their only real competitor is Broadcom, who has slightly worse margin on AI chips.
swalsh · 9m ago
The answer to "how many racks are they selling" is currently as much as they can manufacture, extended out a year.
ergsef · 14m ago
55% net profit doesn't include NRE right? The thing about selling fewer, bigger-ticket items is that the non-recurring engineering costs are amortized over fewer sales. Not to say they aren't printing money, but the unit cost to produce the second GPU pales in comparison to the effort to produce the first one.
moralestapia · 20m ago
>I’ll assume the average GPU price, for the sake of argument, is $1000.
They make big bucks on their premium end of chips. Those contracts are typically on the 8-figure range, I would think they easily have thousands of these around the world.
Even Jensen has implied[1] that the consumer GPU market (i.e. gaming) holds a minor share revenue these days.
1: Citation needed, I know. I mean comments like "we are not going to abandon gamers, etc...".
Spinnaker_ · 9m ago
The contracts are now 10 figures for multiple hyperscalers. And they aren't abandoning gaming, but it's 8% of revenue and falling fast.
Ologn · 27m ago
Nvidia's trailing P/E ratio is 53 (stock hitting a new high today). Its forward P/E ratio is 38.
A year ago both its trailing and forward P/E were higher. So the stock is relatively a bargain compared to what it was a year ago.
The price implies that revenues and profits are expected to continue to grow.
> My intuition is that the absence of the rapid, generationally transformative, advances in tech and industry that were largely seen in the latter half of the 20th-century (quickly followed with smartphones and social networking), stock market investors seem content to force similar patterns onto any marginally plausible narrative that can provide the same aesthetics of growth, even if the most basic arithmetic thoroughly perforates it.
I wouldn't disagree with this.
nativeit · 10m ago
Thanks for the layman’s explanation for the logic involved, that was precisely what I was confused about.
thomassmith65 · 35m ago
Congratulations to Nvidia.
That said, I would be wary about buying shares of any company tied to AI right now.
Very few people scrambling to throw money into 'AI stocks' have any idea about technology. When the music stops it's going to be ugly.
TriangleEdge · 35m ago
The next question is: will I be alive to see the first quadrillion dollar company? Or maybe a 100$ banana?
amelius · 24m ago
Time to start building their own fab, I would say.
2OEH8eoCRo0 · 9m ago
Lunacy for a company that emails a design to TSMC in geopolitically risky Taiwan.
kraemate · 1h ago
Wow, who knew making proprietary accelerators could be so profitable.
What could actually drag Nvidia down and make them spend decades in the dark like Cisco still does? So far the two things I've come up with are: (a) general disillusionment in AI and companies not being able to monetize enough to justify spending on GPUs. (b) Big companies designing their own chips in-house lowering demand for Nvidia GPUs.
I don't think Nvidia can counter (a), but can they overcome (b) by also offering custom chip design services instead of insisting on selling a proprietary AI stack?
The monetary push is very LLM based. One thing being pushed that I am familiar with is LLM assisted programming. LLMs are being pushed to do other things as well. If LLMs don't improve more, or if companies don't see the monetary benefits of using them in the short/medium term, that would drag Nvidia down.
Nvidia has a lot of network effects. Probably only Google has some immunity to that (with its TPUs). I doubt Nvidia will have competition in training LLMs for a while. It is possible a competitor could start taking market share on the low end for inference, but even that would take a while.
If so, the total addressable market of Nvidia might be pretty big.
Let's take the human body as a point of reference. The weight of the human brain makes up about 2% of the human body.
Earth weighs in at about 10^26 kg. 2% of that is about 10^24 kg.
All computer hardware on planet Earth weighs what? Maybe a billion computers times 10 kg? That would be 10^10 kg.
So we still have to up that by a factor of 10^14.
Still 99.9999999999% of the way to go.
i.e. maybe you need “two hits” to become this big, separated by ~2 decades
For nvidia, it was graphics and then programmable GPUs (CUDA)
For Apple, it was GUI desktops and music players/phones
Google is up there, but I’d argue it’s closer to “one hit”, and limited by the founders stepping back and turning the company into an investment conglomerate, rather than being mission-based
When the founders leave, efficiency and creativity seem to be slowed by competing factions of upper management, often working at cross purposes
I’d say that in the best cases, institutional knowledge can build over 2 decades, but it’s also very possible to lose it
I'm not suggesting this is all luck, Nvidia has executed very well and their early investments in programmable GPUs really paid off as a result, but a lot of their insane valuation now is due to crypto and then LLMs which are basically two back to back once in lifetime goldrushes where Nvidia happened to be the best positioned shovel seller.
You can run a company well to prepare to ride such a wave should it appear, but you've also got to be born with horseshoes up your ass for this to work out as well as it has for Nvidia
I find this pretty crazy given that (at least for now) NVidia is the most successful startup of all time. Imagine the millions of other entrepreneurs, many of whom worked just as hard, who completely failed in the process.
The market for compute is endless, and Nvidia makes huge efforts to commoditize the software side of things so people can buy hardware.
Microsoft - Programming Language (1975), Operating Systems (1981), Office Suite (1983)
Meta - Facebook (2004), Instagram (2010)
I would argue microsoft is unique because of how badly IBM screwed up.
EEE and owning the soul of every customer
Facebook and cool zuck
And even if Nvidia had won that contract, the Dreamcast ultimately failed. Nvidia was close to destruction multiple times in its early years.
Nvidia would need to move on the order of 4,000,000,000 units to hit $4T in revenue, more than triple that to realize $4T in profits. Even if the average per-unit costs are 2-3x my estimated $1k, as near as I’ve been able to tell they “only” move a few million units each year for a given sku.
I am struggling to work out how these markets get so inflated, such that it pins a company’s worth to some astronomical figure (some 50x total equity, in this case) that seems wholly untethered to any material potential?
My intuition is that the absence of the rapid, generationally transformative, advances in tech and industry that were largely seen in the latter half of the 20th-century (quickly followed with smartphones and social networking), stock market investors seem content to force similar patterns onto any marginally plausible narrative that can provide the same aesthetics of growth, even if the most basic arithmetic thoroughly perforates it.
That said, I nearly went bankrupt buying a used car recently, so this is a whole lot of unqualified conjecture on my part (but not for nothing, my admittedly limited personal wealth isn’t heavily dependent on such bets).
That's to say nothing of all the other products and services they build. I just visited their website, clicked on "solutions" at the top, and there's waaaay more there than just desktop GPUs. And its worth noting that NVIDIA doesn't manufacture or sell any of the down-market NVIDIA-based boards.
Given NVIDIA's role in data centers, I think the 4T market cap is, while probably still somewhat inflated by speculation, not so inflated as to be a bubble ready to pop.
In other words, why should it matter to me what the company's profit margin or asset base or what not is actually worth when I make money if the stock number goes up?
That means if we hold constant the profit earnings, if you bought the whole company at its current valuation ($4tr), it would take you 37 years to break even.
Is this reasonable? Depends on sector and growth potential. To me, this is a "fair" valuation and not overly inflated based solely on existing earnings.
Fortunately, I opted to pivot towards ratio of total equity, the per-unit activity was a very rough attempt at moving away from abstractions, and that is obviously one of the many flaws in such an exercise.
I already noted the profit margins are incredibly unstable, so I don’t trust the reported figures where they quadrupled inside of a decade. I’m not suggesting it isn’t real, only that it isn’t possible to pin that 55% down as sustainable for any significant period of time, certainly not the 30-50 years is it would take to realize $4T of value at their current pace.
They make big bucks on their premium end of chips. Those contracts are typically on the 8-figure range, I would think they easily have thousands of these around the world.
Even Jensen has implied[1] that the consumer GPU market (i.e. gaming) holds a minor share revenue these days.
1: Citation needed, I know. I mean comments like "we are not going to abandon gamers, etc...".
A year ago both its trailing and forward P/E were higher. So the stock is relatively a bargain compared to what it was a year ago.
The price implies that revenues and profits are expected to continue to grow.
> My intuition is that the absence of the rapid, generationally transformative, advances in tech and industry that were largely seen in the latter half of the 20th-century (quickly followed with smartphones and social networking), stock market investors seem content to force similar patterns onto any marginally plausible narrative that can provide the same aesthetics of growth, even if the most basic arithmetic thoroughly perforates it.
I wouldn't disagree with this.
That said, I would be wary about buying shares of any company tied to AI right now.
Very few people scrambling to throw money into 'AI stocks' have any idea about technology. When the music stops it's going to be ugly.