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Comment by strangescript | Hacker News Reader

I think they have realized that even if OpenAI is first, it won't last long so really its just compute at scale, which is something they already do themselves.

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There is no moat in models (OpenAI).

There is a moat in infra (hyperscalers, Azure, CoreWeave).

There is a moat in compute platform (Nvidia, Cuda).

Maybe there's a moat with good execution and product, but it isn't showing yet. We haven't seen real break out successes. (I don't think you can call ChatGPT a product. It has zero switching cost.)

Is anyone other than Nvdia making money from this particular gold rush?

Data center construction and power companies.

An example: backup power generators lead times is 18 to 24 months

I believe Grok is powered by backup generators.

Tesla makes backup generators.

Do they? Powerwall stores power, but doesn't generate it.

Consulting companies

You need to offer AI just to stay in the business, whatever is your business.

Just look at how much money Google lost in that failed AI demo from 2003.

The stock would be worth 50% less if the invested nothing in AI. Even the founders are back because of it.

Given xAI built its 100k gpu datacenter in a very short time, is the infra really a moat?

I'd say it is because the $ it takes to build out even a small gpu data center is still way, way more than most small cos can do. It's not an impenetrable moat, but it is pretty insulating against startups. Still have a threat from big tech, though I think that will always be true for almost everything

I don't think the hardware is that easy to source just yet. Musk pulled some strings and redirected existing inventory and orders from his other companies, namely Tesla, to accelerate delivery.

xAI does not have infra to sell the service and integrations of it to enterprises and such. It's an open question if "models" alone and simple consumer products that use them are profitable. So, probably hyperscale cloud platform infra is a moat yes. Microsoft has Semantic Kernel, Microsoft.Extensions.AI, various RAG and search services, and an entire ecosystem and platform around using LLM's to build with that xAI does not have. Just having a chat app as interface to one's model is part of the discussion here about models as commodities. xAI does have X/Twitter data which is a constantly updating source of information so in that aspect they themselves do have something unique.

they likely utilized expertise/supply chain from Tesla

What moat does Nvidia have. AMD could have ROCm perfected if they really want to. Also most of pytorch, specially those relevant to transformers runs perfectly on Apple Silicon and TPUs and probably other hardware as well.

If anyone has moat related to Gen AI, I would say it is the data(Google, Meta).

> AMD could have ROCm perfected if they really want to.

It's not an act of will or CEO dictat. It's about hiring and incentivising the right people, putting the right structures in place etc all in the face of competing demands.

Nvidia have a huge head start and by the time AMD have 'caught up' Nvidia with it's greater resources will have moved further ahead.

If head start is a moat, why wouldn't you count OpenAI's headstart as moat?

Anyone can make an LLM. There are hundreds of choices in the market today. Many of them are even open source.

OpenAI brings absolutely nothing unique to the table.

Because we already see firms competing effectively with OpenAI.

There is as yet no indication that AMD can match Nvidia's execution for the very good reason that doing so is extremely difficult. The head start is just the icing on the cake.

I see pre AGI AI to be superset of search and its hard to argue that google isn't ahead technically for decades and what they are doing is extremely difficult.

Not all industries or product segments are equal is the obvious answer. The point here whether one agrees or not is models are easier to catch up to than GPUs

A head start is a moat iff you can't move easily from the leader to a competitor that catches up qualitatively; nvidia’s headstart against AMD is a moat to the extent that you can't just take the software written against NVidia GPUs and run it on AMD if AMD catches up. (That is, being currently ahead isn't a moat, but it can impose switching costs which are.)

Taking code that runs against one hosted LLM and running it against a different backend LLM is... not generally a big deal. So OpenAI being ahead—in the core model, at least—is just being ahead, its not a moat.

ROCM is close to being perfected and I think in few years and some investment you can use it directly to run 99% software written in CUDA with similar performance.

Since 2007 Nvidia has built with CUDA and compatible hardware

- a large and growing ecosystem

- a massive installed base of backwards compatible hardware

- the ability to massively scale delivery of new systems

- and lots lots more

They now have scale that enables them to continue to invest at a level that no competition can do.

None of these are easily reproduced.

As per SemiAnalysis AMD in late 2024 can’t get essential software working reliably out of the box.

It’s easy to say AMD ‘is close to perfecting ROCM’ the reality of competing with Nvidia is much harder.

It's hard but not $3T hard. AMD has consistently underinvested in their software. If they invest double digit million to make installation and usage of drivers and ROCM smoother I highly doubt they can't acheive it.

There are open source projects volunteer run projects[1] that are better than official AMD implementation in many ways.

[1]: https://github.com/CHIP-SPV/chipStar/

If it's so cheap and easy then why haven't they done it already?

ChatGPT was announced Nov 22. The opportunity has been clear for two years and still essential software breaks.

Because they have to rethink a lot organizationaly to put more effort into software. If installing their drivers is so flaky you can't argue they really are trying or putting their best folks in this. Single click installation on top 10 linux distro is something even one (top in the industry)person could achieve.

> I don't think you can call ChatGPT a product. It has zero switching cost.

In consumer markets the moat is habits. The switching cost for Google Search is zero. The switching cost for Coke is zero. The switching cost for Crest toothpaste is zero. Yet nobody switches.

(Never mind I was wrong -- deleting my comment to not spread misinformation. The definition of moat is wider than I was familiar with, thanks for the correction!)

A strong brand is most definitely a moat. So is habit. Any source you can find that defines economic moats will list those.

https://corporatefinanceinstitute.com/resources/management/e...

Minor nit, but brand and habit are kinda the same thing. The habit is that you buy a particular brand.

I’m not that old and I remember people switching away from Geocities, ICQ, Yahoo, many social media sites etc

I used to work for Coke — they've been making a lot of money for a very long time.

The size of a moat befits the size of a castle it protects. Coke absolutely has a moat, but it's not big enough to defend Coke as a trillion dollar company.

The question isn't whether OpenAI has a moat or not, it's if its current moat is big enough to protect a trillion-dollar company.

The person I'm responding to just said there was no moat because switching costs were zero. They didn't say anything about a trillion dollar valuation. But, while we're on the topic, Google's market cap is $2T because people can't be bothered to change the default search engine in their browser.

Not to nitpick but..

1. The switching cost from Google Search is certainly not zero, it implies switching from Google, which is virtually impossible because it's tied to Chrome, YouTube, Android and Gmail

2. I don't know many people who are dedicated "Pepsi" fans, they just grab whatever drink is available Coke/Pepsi..

3. I've also not heard many people who are never willing to switch from "Crest".. People will just grab the next available option if Crest is not on shelf. No one is pre-ordering Crest.

I will nitpick this one:

> 1. The switching cost from Google Search is certainly not zero, it implies switching from Google, which is virtually impossible because it's tied to Chrome, YouTube, Android and Gmail

Google Search is a product. Not the whole company. Switching to most other search engines is $0. Naturally no one is honor bound to use anything else you listed either.

You’re standing in the aisle at the supermarket, looking at the soda. Everything is in stock. What do you grab? Most people make the same decision for their entire life: Coke. That is the moat that Pepsi has been trying to overcome for decades.

> That is the moat that Pepsi has been trying to overcome for decades.

Pepsi makes more revenue compared to Coke. Shouldn't it be Coke who should be trying to do what Pepsi is doing?

According to this[0], Coke (the cola brand, not the company) has a ~19% soft drink market share in the US vs. Pepsi at ~8%. This[1] has Coke (the company, not the cola brand) at a 69% market share of the US soft drink market vs. Pepsi 15 27%. Pepsi is a larger company, though, because they own a bunch of snack food brands whereas Coke is beverages only.

0: https://www.wfaa.com/article/news/local/us-soda-rankings-cok... 1: https://www.investopedia.com/ask/answers/060415/how-much-glo...

>There is a moat in compute platform (Nvidia, Cuda).

Ironically if AI companies are actually able to deliver in terms of SWE agents, Nvidia's moat could start to disappear. I believe Nvidia's moat is basically in the form of software which can be automatically verified.

I sold my Nvidia stock when I realized this. The bull case for Nvidia is ultimately a bear case.

There is a moat in the brand they're building.

Look at Coca Cola, Google, both have plausible competitors, zero switching cost but they maintain their moat without effort.

Being first is still a massive advantage. At this point they should only strive to avoid big mistake and they're set.

Coca Cola only has a moat because soft drinks and junk food are mostly a done product without much space for innovation left.

AI is still not there yet, and if any model becomes significantly better than ChatGPT people will flock over to use it despite the branding. It's only when nobody can make better models, then people will just stick to the known brands.

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