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Comment by actionfromafar | Hacker News Reader

What stops Nvidia from cutting out the middlemen? They have the chips.

I don't think we can know about the long term, but I would assume that in the short-medium term, Nvidia can make a lot more money by continuing to sell its cards, where it's almost a monopoly, rather than competing in the overcrowded product space.

We don't yet know if there's actually any gold in the mine or not this time around, but we know for certain that there is money to be made selling pickaxes to the miners.

There is probably more money to be made selling the tools.

I wonder if any shovel manufacturers invested into mining during the gold rush...

They lose their customers. TSMC succeeded because they didn't compete with their customers. When they started, they focused on making chips for others. Any other company that that had a Fab could offer the same service at the same quality back then. Yet folks choose TSMC because there was no conflict of interest. If Nvidia starts competing with their customers, that conflict of interest will force some of those customers to look else where. I suspect Nvidia is releasing these things to add value to using their GPUs, kinda like offering free tools for your OS, notepad, calculator, browser, etc

Nothing, in the same way that TSMC could cut Nvidia and OpenAI out.

Vertical integration is incredibly powerful, but it requires mastery of the whole stack.

Does Nvidia understand AI consumers the way OpenAI / Anthropocene does? Do they have the distribution channels? Can they operate services at that scale?

If they can truly do it all and the middlemen don’t add any unique value, Nvidia (or TSMC) can and should make an integration play. TBB I’m skeptical though.

> Nothing, in the same way that TSMC could cut Nvidia and OpenAI out.

one thing is not like the other.

They’re exactly alike. The question is “why doesn’t an upstream supplier just use its own products and cut their customers out?”

If you prefer, we can ask why TSMC doesn’t cut Nvidia out and just design AI chips. It gets to the same place: expertise as a supplier in one stage of a value chain is not fungible to all stages.

But it's entirely possible to me that TSMC lacks some of the hardware knowledge that Nvidia has. A fab has a lot more than just TSMC equipment in, hasn't it?

I disagree. Nvidia designs chips and has demonstrated it can move between manufacturers (TSMC to Samsung). TSMC does not have know-how to design nvidia level of chips or develop supporting infrastructure (software and sales) because a) they have demonstrated they don't have any b) other players which do have capacity like AMD and Intel have also demonstrated they don't have any.

Nvidia can move its vertical, TSMC not really. If you would've mentioned Apple for example, then maybe.. since that know-how is licensable to an extent (Arm).

They kinda need to do it to justify their price

https://ngc.nvidia.com/

There’s no need to cut them out, the symbiosis is working perfectly.

Huh? Their position in the market is much better than that of OpenAI and Co. Selling hardware and services is sure business. Training models is by contrast a risky business, and even if you attain SOTA, you cannot relax because your competitors will be on your tail. From a purely pragmatic perspective they also do not have the manpower to compete seriously in that space.

Doing so would mean incentivizing customers to seek alternative routes and migrate to competitor. Thus with the risk of losing the current moat.

Given they are releasing models, whose to say that they don't have teams working -- not secretly -- just not in the open?

They literally have paid platforms to use their models.

Then they would quickly discover that their moat isn't as strong as people think it is.

They would have to pay for them.

middlemen to what?

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