Is this bullish for NVDA?
Decreasing resource cost of intelligence should increase consumption of intelligence. That would be the bull case for Nvidia.
If you believe there's a hard limit on how much intelligence society wishes to consume, that's a bear case.
> If you believe there's a hard limit on how much intelligence society wishes to consume
I feel like I walked-in on a LessWrong+LinkedIn convention.
Long term bullish as always, but tech leaders are behaving in cringeworthy ways right now.
But the problem for NVDA is that they charge too much for it. I'm pretty sure that other companies, maybe the Chinese, will commoditize GPUs is not so distant future.
We live in such weird times, what the fuck does that even mean
In fact you could see the bullish case last night: Deepseek's free chat service got overloaded and crapped out due to lack of GPU capacity. That's bullish for NVIDIA.
Unless, of course, the market is saying "there's only so much we see anyone doing with genAI."
Which is what the 15% haircut they've taken today would indicate they're saying.
I think it makes more sense if someone thinks "Gen AI is just NVIDIA - and if china has Gen AI, then they must have their own NVIDIA" so they sell.
But it makes the most sense if someone thinks "Headlines link US lead in Gen AI and NVIDIA, bad headlines for Gen AI must mean bad news for NVIDIA".
And the theoretically ultimate market analysis guru probably thinks "Everyone is wrong about Gen AI and NVIDIA being intimately linked, but that will make them sell regarding this news, so I must also sell and buy back at bottom"
That's most likely exactly what's going on.
Markets aren't about intrinsic values, they're about predicting what everyone else is going to do. Couple that with the fact that credit is shackled to confidence, and so much of market valuations are based on available credit. One stiff breeze is all it takes to shake confidence, collapse credit, and spark a run on the market.
All this proves is that there exist no non-NVIDIA solutions to the hottest new thing.
You're exactly right.
People in the US treat the market like the Oracle of Delphi. It's really just a bunch of people who don't have a grasp on things like AI or the tech industry at large placing wagers on who's gonna make the most money in those fields.
And you can apply that to most fields that publicly-traded companies operate in.
But roughly, I suspect the main thing is "enough people thought NVDA was the only supplier for AI chips, and now they realize there's at least one other" that it slipped.
If NVidia make money per compute capacity, and a new method requires less capacity, then all other things being equal NVidia will make less money.
Now, you might say "demand will make more use of the available resources", but that really depends, and certainly there is a limit to demand for anything.
Also Nvidia's profit are based on the margins. If there is less demand, there is most likely less margins unless they limit supply. Thus their profit will go down either as they sell less or they profit less per unit sold.
As of right now, there's the limited number of use cases to be applied to GenAI. Maybe that will change now that the barriers to entry have been substantially lowered and more people can play with ideas.
Short-term: bearish
Long-term: bullish
The bull case as I see it is that demand for AI capacity will always rise to meet supply, at least until it starts to hit some very high natural limits based on things like human population size and availability of natural resources on or in reasonable proximity to Earth. Just as we quickly found uses for more than 640 KB RAM and gigabit+ Internet connections, there's no shortage of what could be done with 1000x more AI capacity. Best case scenario, we're eventually going to start throwing as much compute as humanly possible at running fully automated factories, automatically building new factories and infrastructure, running automated factories that build the machines that automatically build factories and infrastructure, and so on. Looking forward a bit further, it's not hard to imagine an AI-driven process of terraforming and industrializing Mars.
I don't know how much if any of that would be possible with current AI software given a hypothetical infinitely powerful GPU, but AI is still rapidly improving. Once it gets to the point where it can make humanoid robots do tasks at a lower cost than human labor, the demand ceiling will shoot sky-high and become a self-reinforcing feedback loop. AI will be used 24/7 to churn out new AI capacity, robots, power infrastructure, and so on, along with all the other things we might want it to produce (cars, cities, high-speed rail, drone carriers, food, etc.).
Imagine having an equivalent to AWS that could be used for provisioning and managing low-cost automatons with comparable physical and cognitive capabilities to average human laborers, along with self-driving cars, AI-controlled construction and manufacturing equipment, and so on. That would be on top of all the purely digital capabilities that are already commonplace and rapidly improving. Essentially, every public works project or business idea that anyone could conceive of would ultimately become viable to attempt with a dramatically smaller amount of capital than today, so long as the necessary natural resources were physically available and there were no insurmountable legal/regulatory roadblocks. We have an awful lot of undeveloped land and an awful lot of people on the planet who could certainly find interesting things to do with a glut of AI capacity.
I guess you’re assuming AGI is close and you mean demand for AGI? Because I think there will be significant demand but certainly not endless for things like ChatGPT in its current form. OpenAI’s revenue last year was $4B, which is very impressive but doesn’t feel like the demand is “endless”. By comparison, Apple’s revenue the same year was $400B. There are limits to what LLMs in their current form can do.
As far as current LLM capabilities, I do think there's a massive amount of untapped demand even for that. ChatGPT is like the AOL of genAI — the first majorly successful consumer mass market product, but still ultimately just a proof of concept to capture the popular imagination. The real value will be seen as agents start getting plugged into everything, new generations of startups and small businesses are built from the ground up on LLM-driven business processes by non-technical founders with tiny teams, and any random teenager has a team of AI assistants actively managing their social life and interacting with a variety of platforms on their behalf.
Tons of things that big businesses and public figures pay full-time salaries for humans to do will suddenly become accessible to small uncapitalized ventures and everyday people. None of that requires a fundamental improvement to LLMs as we know them today, just cost reduction through increased supply and continued work by the tech industry to integrate and package these capabilities in user-friendly forms. If ChatGPT is AOL, then 5G, mobile, IOT, smart devices, e-commerce, streaming, social media, and so on should all be right around the corner.
Right?