Elliott says Nvidia is in a 'bubble' and AI is 'overhyped'
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But NVIDIA investors do, NVIDIA's current valuations relies on GPU's continuing to sell at premium prices at ever increasing demand for decades to come, otherwise they wont be close to make trillions in total future profits that their current market cap demands.
It just seems like the current valuation is upheld by excellent performance and demand outstripping supply in the current moment. Throw in everyone being blown away by LLMs performance + lots of hype and people choosing the one company to put their bet on.
And on other hand question can also be total cost of ownership. If you have slower and more energy inefficient competing product. But the cost over lifetime is only say 75% it is not that bad deal...
Doesn't look very valid from my perspective, having used ChatGPT almost every day for more than a year.
There must be at least 6 major players among OpenAI, Microsoft, Google, Meta, Apple, Stability, and more that I haven't kept track of. NVIDIA has no way of knowing how viable all these businesses are in the medium term, they know how many GPUs they're buying while investment capital is flowing to them.
And I blame squarely business majors for their blind faith in assets whose price goes up with no explanation, they are the ones who always push the hardest for adoption of these fads with no understanding of what the actual value behind them is.
Worse, those tech companies have been the only thing propping up the stock market, and arguably the economy as a whole. Collectively they may very well fall into the too big to fail category, whether because the feds can't allow them to lose all that value or because investors can't afford to properly value the companies when the hype dies.
I do agree that part of the massive investment in GPUs and LLMs at the biggest tech companies is fear of missing out. I also think a decent part of it is a lack of concern over real downsides. What will really happen when all the tech companies have to write off all those investments? They either get what is deserved, something like the dotcom bubble, or they all see a short lived decline in stocks that disappears quickly when they find a new hype train to jump on.
What? How does a company not need to care whether it's customers are sitting on a financial bubble and might not exist anymore in a few years? Why would Amazon continue to massively invest in GPUs if they don't have customers for them?
This argument makes literally no sense.
It's also about manipulating their clients' opinions -- say, in the direction of believing that staying with Elliott will, eventually, work out better than moving everything to ARK.
> If they honestly expected their observations to exactly predict the future, publicizing them would just lose them all their alpha.
Not if they're talking about positions in which they're already fully invested. In that case they are "talking their book".
All the people talking out loud here have bridges to sell
And NVIDIA is worth ~3T so I am sure there’s few people that have been listening to hedge funds and their opinion about AI and NVIDIA for the past couple of years.
So be careful.
But google for "options contracts". You'll need a broker and they will most likely make you get approvals for it. Usually you have to show some financial sophistication.
Only if you write/sell them. Buying an option you can only lose 100% of what you paid for it. (Which is the outcome most of the time.)
Your overall point of educating yourself on how options work before you jump in is well advised though; options are risky and way more leveraged than stocks.
Of course, but if you don't know what you are doing, it's hard to tell the difference, especially since selling options can make you a lot more money so it looks like the better play if you don't know what you are doing.
Thinking "AI is a bubble" is not a good enough reason to short a company.
Unlike options you can sell short and hold the position for as long as you can fund it - cover the cost of repurchasing the shares if it goes up and pay dividends etc.
The trouble with shorting meme/viral/bubble stocks is the price may go a lot higher in the short term
I don't recall who said it, but if you put the same unexperienced investor in two paralell universes, one where they short and one where they long, the more likely outcome is that they will lose money on both.
The opening position is just one part of the equation.
Programmers have gotten pretty good at hiding latency nowadays and Nvidia makes the most popular high-throughput devices, and has an utterly dominant software ecosystem for those types of devices.
Meanwhile Intel continues to fumble. AMD actually doing pretty ok on the hardware side, but their software ecosystem is not great. Who’s going to compete with Nvidia? Apple, lol?
Again, that’s why you see these periodic mining bubbles, AI bubbles, etc, as various fields discover their killer app for gpgpus.
You should stop calling them mining bubbles or whatever and just call them what they really are: “dense compute surge demand”.
>Who’s going to compete with Nvidia?
You know what is the surest way for a market leading company to go bankrupt? Pretending that the current situation is inevitable and no competitor will ever try to challenge them.
If you mean that their equity will continue to grow and trade at its current valuations I find that one tough to swallow (i.e. I wouldn't buy it right now). Right now the P/E isn't terrible but its under the assumption that their chipsets continue to be the dominant chipset and that all the major tech companies keep buying them at the volumes that they currently do - seems unlikely to me.
Now a good place to work for a company that will be around for a long time -- sure safe bet there.
Being a compiler target for someone else’s ecosystem is not a moat. Being a compatible clone of someone else’s ecosystem is not a most.
Nvidia has spent 15 years building out cuda and seeding it into key places, at enormous expense. Apple has the best laptop hardware on the planet and a significantly underappreciated degree of traction among tech enthusiasts and makers that is going to pay long-term dividends if apple can simply avoid rocking the boat.
Sony, similarly, has a successful history and culture of proprietary ecosystem and API usage, and studios are onboard with using it. PS5 Pro might as well come with an RTX sticker given the headline focus on RT and AI upscaling, and I think people are underestimating the degree to which this is going to give Sony an early-mover advantage in shaking out applications of AI in the gaming space. You know the nemesis system patents… they’re well-positioned for squatting patents on key ideas that shake out early.
Just like they thought that the price of real estate would always go up, until it didn't in 2006 or so.
We're in for a correction, a strong correction, in hardware demand. Someone will figure out a better algorithm, a better way to do transfer learning, or maybe a better architecture for AI chips that greatly increases performance.
At the rate things are going, we'll be using 2 bit arithmetic (0,1,infinity,-1) for models and all of the huge multiply-accumulate arrays won't be quite so useful.
I don't see how "line goes up" continues forever.
Sober assessment in my opinion. It is obviously hard to make predictions about the future, but AI, as it exists now, has not revolutionized the world. It definitely makes me some percentage points more productive, but while the overall effect of a widely spread small productivity enhancement might be large, that doesn't means the technology lives up to the revolution it promised.
Best you can do is to open an excel, predict their cash flow for a decade with which growth and decide what is the sum you're willing to pay
I feel like we are in a very rude awakening for a crash very soon, we have already seen multiple AI products come out and fail horribly.
In my view there are 4 possible outcomes:
- It is not overhyped but we realize that the current pace of things is un-sustainable for a variety of reasons and investment is decreased.
- It is mildly overhyped but we realize that the vast majority of what these startups are doing can be done by Google, Microsoft, or Apple with just a minor change to their system prompt. And its moved to on device processing threatening Nvidia.
- It is seriously overhyped, beyond AI startups failing we have a major issue like someone dieing or some other major scandal caused by AI doing something and no human verified it. We go back to recognizing what the technology actually is and what its limitations are.
- We hit a wall with the current implementation and it does a decent job at things, but progress just stalls and hype dies down.
I just don't see a positive outcome given the many issues that have come up and it being shoved into places as a source of authority and time and time again, it fails.
Edit: Thank you for the archive. Yeah that aligns.
Regardless of hype or utility, these things are ridiculously expensive to run at any sort of scale.
I probably should have been more clear, that is what I was referring to it being unsustainable. Cost, Energy use, Environmental impact, etc. All the things that are coming out recently about the "hidden cost" of AI.
AI overhyped? What?!?! Has this person used LLMs at all?
Without a doubt, LLM AI is the most useful thing to happen to me. Probably on-par with than the entire internet due to how quickly I can get a response and how detailed/nuanced/niche it can be.
I expect AI to eliminate the need for most diagnosing doctors and pharmacists. If we can't get that back in GDP, its a medical corruption problem. That example alone should be proof that AI is not overhyped.
>I expect AI to eliminate the need for most diagnosing doctors and pharmacists.
That is a ridiculous claim if you know anything about the medical profession.
Rofl
Anyway, I own a medical clinic, and chatGPT is literally better than my practitioners at diagnosis. I have seen patients cured after 2 years of incorrect diagnosis because we entered their symptoms into GPT3... yeah.. that was GPT3.
Even if it were true you could easily outperform a chatbot by basic medical knowledge. If doctors do not have that they are quacks and should not be practicing medicine.
Right now you are seeing the RT groundwork finally take root - cerny is talking about how “surprised” they were about studios being so excited about RT. And sure it looks better, but the part cerny missed is that with game budgets ballooning, studios are eager to save wherever they can, and it turns out RT lighting can save about 25% of the development cost of a game.
So now you are seeing a pivot to RT-by-default. We literally already have multiple games that do not even have a non-RT fallback renderer, on non-RT hardware they just do software-raytracing with shit-quality BVH and low ray count done on the cpu side instead of the gpu. Traditional raster fallback is essentially dead in the UE5 era.
So far it’s metro EE, then Fortnite (even on series S!), Alan Wane, Avatar: Pandora, etc.
The writing is on the wall, he did it again. That’s why Cerny is surprised, that’s why PS5 Pro might as well come with an RTX logo (the headline feature is the massive improvement in RT, plus AI upscaling), and that’s why AMD finally grumbled and is pushing forward a proper implementation in RDNA4.
btw. yesterday I came across withpretzel.com, this is a revolution for working interactively with supercomputers and jupyer.
Maybe in aggregate all those moderate successes justify the valuations of Nvidia and the cloud providers but so far there is no massive AI use case, just a lot of little improvements.
How quickly or effectively will model creators be able to make their vertically integrated custom training hardware is an open question and determines how you should bet imo.
Nvidia is trying to make themselves a vertically integrated product with a necessary software layer on top, but it’s not obvious if that will succeed or if it’s enough of a moat to hold on to the monopoly long term with the incentives as they are.
Intelligent software is such an obvious capability shift that its dismissal as overhyped is dumb. The web was known to be a big deal in the 90s but it was still hard to bet on and in 99 you would have lost a lot of money in most cases. Does that mean the web was overhyped?
Enormous value will be created and captured - Nvidia has a monopoly now, if you think it’s resilient you should buy but it’s unclear how resilient it really is and it could drop in the short term either way. Major shifts are hard to bet on.
Even obvious bets like Amazon in 99 you’d have to have waited a long time to 10x your initial investment.
My personal take was I bought Nvidia when this seemed obvious a year ago and sold it when it hit 3T. It seemed clear it’d capture all the value on training in the short term, but I’m less certain about the future and 3T is a lot.
Uhh... I was with them on the "bubble" and "overhyped" from a valuation perspective. Without having done the proper math of a valuation model, it does seem (based on gut/experience) that the expected value here is baking in too much certainty when this is still early innings...
But I wouldn't go as far as saying products will never work. It's really hard to make predictions, especially about the future.
They like to call out bad management teams, stealthily build up sizeable stakes in companies until they hit a threshold (5%) at which point they must disclose their position, then they demand a seat or two on the board of directors and start trying to stir up shit to change the company so that it improves its return to shareholders. They often succeed.
Which is to say they have something of a contrarian view on a lot of things. It must be a cool gig, tbh. Beats being the CEO's yes-man which is the case for all sorts of advisor roles..
"In the short run, the market is a voting machine but in the long run, it is a weighing machine."
- Warren Buffet
Might be a 45-day delay for its public disclosure, although.
Problem is that big tech has no idea how to capitalize on AI! So far their biggest "idea" was how to censor it!
>Many jobs and professions will be eliminated.
What jobs and professions were eliminated by the internet and/or social media? I can think of jobs eliminated by computers (computer was originally a job title, after all), but none that were entirely eliminated by the internet.
AI is a bubble, something will remain, far resized, but the main issue here is that we are about to loose our software primacy because some big giants want an untenable model to keep their profit instead of keeping the desktop model with the user at the center, not the service at the center with "endpoints" scattered around. Unfortunately DUE to certain commercial practice most people do not know nor understand the power of IT so there is no real push against certain models.
AI is explicitly designed to replace workers. To make artificial people who don’t eat, drink, sleep, take breaks, go on strike, ask for a raise, take maternity leave, or disobey.