Hacker News Reader

Comment by Uehreka | Hacker News Reader

They’re all pretty motivated, they’ve been motivated for years, and almost nothing is happening. This situation isn’t exactly a poster child for the Efficient Markets Hypothesis.

Every year just sounds like “Nvidia’s new consumer GPUs are adding new features, breaking previous performance ceilings, running games at huge resolutions and framerates. Their datacenter cards are completely sold out because they can spin straw into gold, and Nvidia continues to develop new AI and graphics techniques built on their proprietary CUDA framework (that no one else can implement). Meanwhile AMD has finally sorted out raytracing, and their consumer GPUs are… well not as good as Nvidia’s but they’re a better value if you’re looking for a competitor to one of Nvidia’s 60 or 70 line GPUs!”

View on HN

Efficient market hypothesis is unrelated to Nvidia’s competitors being unable to offer a competing product so far.

https://www.investopedia.com/terms/e/efficientmarkethypothes...

> The efficient market hypothesis (EMH), alternatively known as the efficient market theory, is a hypothesis that states that share prices reflect all information and consistent alpha generation is impossible.

you know what he meant...

I honestly dont. I'm trying to think of what principle they could have meant with "This situation isn’t exactly a poster child for X" where X is any economic principle and coming up empty.

Best I've got is "central planning". One firm being able to handily out perform others despite them also being both motivated and well capitalised lends itself pretty heavily towards markets being good, but I hardly think they were referring to "central planning" when they wrote "efficient market hypothesis".

If it's so obvious to you that you're dropping ellipsis, care to clue us in?

My impression was that they used "Efficient Market Hypothesis" to mean "the theory that free-market competition rapidly drives down prices and breaks up monopolies on its own".

That theory is still valid, the issue is that the competition can't or won't even try to make a better product or a cheaper one. The rule only applies if there exist competing products in the first place.

If there was any, the prices would go down as we have seen a billion times.

So, why’s that not happening, and what’s it imply for the rest of the theoretical framework?

It’s not happening because 10,000 people who have more intimate knowledge of the business than you or I ever will have made decisions to best suit their current conditions. This isn’t an exception to the rule, you’re just looking at a small timeframe and a remarkably performant company. Why is it so bad for a company to be successful when they have provided so much back to society in the form of R&D? Besides, if I’m doing ML my boss has paid for the card anyway so the price doesn’t concern me.

This is the point.

This is a textbook situation that would be perfect for a competitor to come in and undercut. However not only is that not happening, nobody is even trying.

Making the “theory” pretty worthless if it’s not even applicable in cases that would naturally produce this market entrant.

The reality is that private equity does not actually want to compete with large global brands.

> This is a textbook situation that would be perfect for a competitor to come in and undercut.

Is it? A competitor can enter the market and undercut by producing a cheaper and otherwise undifferentiated commodity-type product. Nvidia's focus is adding moats that prevent competing on pure specs such as CUDA, design, and so on.

Nvidia started working on CUDA back in the mid-2000s. Nobody else cared about GPU compute back then.

I didn't know CUDA was in development for that long, thanks! I'm curious if there were serious attempts to create something similar over the years and how far they managed to progress. I've never used OpenCL but from looking at it from afar its adoption always seemed limited.

Irrespectively though I don't see how a competitor can replicate the context and tacit knowledge associated building something like CUDA for close to 20 years without putting in a similar amount of time.

The first version of CUDA was released in 2007 so I would not be surprised if they started working on it in the 90s. These things take time.

Nvidia also made sure that CUDA runs on gaming GPUs and supports Windows. This is why its tools are so good. You don't need to buy a datacenter GPU, no need to mess with Linux. Just buy any gaming GPU, install CUDA SDK and you're good to go.

AMD wasn't like that. Their alternative - ROCM didn't even work on gaming GPUs. Their datacenter GPUs didn't even support Windows. Basically the opposite approach of NVIDIA. Now AMD is rushing to add Windows and consumer GPU support to ROCM, but it's a bit too little too late.

> This is a textbook situation that would be perfect for a competitor to come in and undercut.

They already are undercutting.

Some business that are really into hyper-scaling are already pouring man-hours into making those "undercut" alternative products work. Specifically because sometimes you can't affort Nvidia at that scale. Or they have a large enough scale that they can make it work with suboptimal tech.

It's just that for most business the man-hours required to make "undercut" products work still aren't cheap enough to win in cost-benefit.

> However not only is that not happening, nobody is even trying.

A lot of companies are trying. It's just that nvidia is really good and significantly ahead.

> This is a textbook situation that would be perfect for a competitor to come in and undercut.

Do you have any idea how much R&D it takes to make a GPU, let alone something that could possibly compete with NVIDIA?

This is not something a dozen people in a large garage are going to do.

> However not only is that not happening, nobody is even trying.

AMD has been trying to compete for years. If you're a gamer that doesn't care about getting the top performance and just wants to optimize price/performance, their offerings aren't bad.

> The reality is that private equity does not actually want to compete with large global brands.

Because the barrier of entry into the GPU market is probably at least a couple billion dollars.

> the barrier of entry into the GPU market is probably at least a couple billion dollars.

There are $BN Private Equity deals done everyday, there's plenty of money to fund a competitor.

No, I think people are just scared and don't care about the existence of monopolies.

> the theory that free-market competition rapidly drives down prices and breaks up monopolies on its own

You mean a theory that no economic school actually believes? Not even Austrians would sign that.

Not endorsing that theory, just offering my best guess at what the person probably meant when they used "Efficient Market Theory" in their comment, based on the context.

You sound very confused. That’s economics 101 just about everywhere. The friction is generally termed “barriers to entry” if that helps reorient you.

Well, patents are certainly a good way to create monopolies, which wouldn't exist in an actually free market with no patents. In addition, there's interventions in place which don't allow certain tech exports to China, for example. Not sure how much better the situation would be without these.

I think the principle is called perfect market or perfect competition, but it's only a theoretical concept. However, it's certainly possible that the market is less perfect than it could be due to interventions and regulations.

No, spell it out because it’s complete nonsense as it is. The efficient market hypothesis has zero relationship to barriers of entry, network effects, or any of the other dozen concepts that maybe are actually at play here.

> This situation isn’t exactly a poster child for the Efficient Markets Hypothesis.

I'm unsure why you're criticizing the Efficient Markets Hypothesis or even using it here, but you need to also analyze this with some time horizon because the market and marketplaces are not static.

Their description could be used to describe the situation in 2023, 2022, 2021, 2020, 2019, 2018, 2017, and 2016.

Tech design and development seems, to me at least, pretty much naturally opposed to the "being kept in check with competition" state - as design isn't really a cost that scales per-unit, the company that sells slightly more can afford to put more into development at the same per-unit margin, which snowballs. At some point, they own the entire market - or enough that they functionally control it, and start leveraging this position. I'd argue we're seeing this from Nvidia right now.

People talk about AMD being competition - but from most stats I've seen, they're ~10% of dGPU sales, with Nvidia being the other 90% (with new Intel offerings being pretty much noise now). That means that if they invest the same proportion into development, NVidia nearly have 10x the resources.

It may be that tech companies like this would "naturally" form a monopoly without outside (IE government) interference, as the only reason that multiplier of development resources doesn't completely crush new entrants is rather extreme mismanagement, or a new segment is created where the design resource don't really cross over that much.

I don't see anything like that happening in the short term, if anything there seems to be more opportunity for cross pollination of development within these corporations, as there's a fair bit of design similarities between various silicon (GPUs, CPUs, accelerators for the current ML techniques etc.) that may encourage more consolidation in the whole semi market to take advantage of that, not less. But again the only thing stepping in the way of that seems to be governments trying to keep national interests, like the blocking of NVidia buying ARM to pull in one of the big CPU players. Plus all their other IP that they may benefit from, like low power GPU designs or other accelerators ARM have designed.

At the end of the day, what nvidia does is just producing IP. All manufacture is by other companies.

This means that nvidia capital is spend on testing/development infrastructure and creative labor.

So, you don’t need monopoly breaking to handle nvidia if it keeps growing, but instead rethink IP laws.

Testing infrastructure is less capital investment than production manufacture. (See ASML and TSMC beeing booked), and humans can be persuaded to work elsewhere.

This means Nvidia cannot fall a sleep, even if they keep snowballing. In a few years a rival can always arrive, or current ones snag key people or have dev/test infra breakthrough, or IP law could change as its critics rise every year.

Sure, if Nvidia keeps its good game it will keep on growing and get even bigger share, but if it doesn’t, it will happen what happened with intel, intel got greedy on its position, and the company got fat.

As long as nvidia keeps its game, it’ll be good for customers even if they swallow more market share, as prices are always limited by the value business customers get from AI, and the investment needed for a competitor is not even close to infrastructure or resource extraction stuff like high end chip fabs, oil extraction, energy grids, telecom grids.

Again, Nvidia does not produce any physical goods, only designs.

I think Intel having in-house manufacturing was one of the big causes of them getting "Too fat and slow to respond" - from the outside much of their fall from grace was due to massively delayed production improvements rather than designs and IP. As far as I can see, the architectures were pretty much done and ready to go, just the expected targeted process missed it's mark.

With Nvidia and other GPU competitors being IP-focused, effectively outsourcing all this "manufacturing stuff" (to the same 3rd party much of the time), that's one less thing for them to keep up with, and one less think that'll hurt if they do start "falling asleep". I can't see this happening to Nvidia in quite the same way right now. My point was that not having manufacturing makes advantages of consolidation larger, not smaller.

I wonder what would have happened if Intel realized it's manufacturing wasn't hitting targets and "quickly" added TSMC as an option, would AMD even have had a chance with ryzen? There was clearly a time when AMD had superior manufacturing processes through them, if Intel's designs of the time were on the same process would they have managed to grab the headlines?

And no, I Strongly disagree that NVidia running unchecked over the entire market being "Good for consumers", and not sure if the capital expenditure of getting over this moat is really much smaller than things like resource acquisition or infrastructure, they have $billions in current software ecosystems and hardware designs. Those $billions probably could buy you a fair bit of infrastructure investment on the scale you mentioned. Look how much Intel is burning right now just to get a toe into the market and not laughed out the door - and they're still clearly behind their competitors right now. Their chips aren't anywhere near competitive from a performance-per-area point of view, and their software is rather poor for the vast majority of use cases.

It's not like designing this kind of product is easy; or that Nvidia's designers are sitting idle; or that everybody else's design team is not busy building something else. There are in fact many competent design teams, chipping at their own business.

There are in fact startups, also doing what they can (and probably not trying to go head on against the most productive competitor they can find.) And it has been reported countless times that some of the biggest customers of Nvidia are actually trying to design their own.

If you want to point out a market with broken competition, this isn't it.

To play the free market advocate:

The situation is created by artificial restrictions on free market (namely state enforced monopolies on "IPR", or as some call it, imaginary property).

Aren't AMD's competing against nvidia's 80 series GPUs these days?

Are they motivated? Seems like a massive coincidence how the big two of the GPU world are cousins, and one has been having massive success on the CPU, the other on GPU/AI, and every attempt from both side to enter the other's niche has been pretty weak.

AMD compute is nowhere compared to NVIDIA. NVIDIA wanted to buy ARM, has got its finger in RISC-V, but apart from that, they don't really care. To be fair AMD has done decent with GPUs, but never enough to dethrone NVIDIA, whose playbook for the past few gens is "just make everything bigger than last gen and increase the frequency." Surely AMD could have chosen the same lazy approach to surpass the 4090 only just, but instead they didn't, so it's still NV undefeated in its space because AMD forgot to squeeze the last 1% out of their card.

The market is powerless if the competitors aren't really competing. Intel is the only chance, unless they manage to get their own Taiwanese CEO somehow related to Huang and Su.

Leaving aside the weird conspiracy stuff, I don't know how you can see stuff like the nvlink C2C that makes Grace Hopper possible and think they went "just make everything bigger".

Reply on news.ycombinator.com