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.)
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.
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.
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.
If anyone has moat related to Gen AI, I would say it is the data(Google, Meta).
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.
OpenAI brings absolutely nothing unique to the table.
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.
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.
- 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.
There are open source projects volunteer run projects[1] that are better than official AMD implementation in many ways.
ChatGPT was announced Nov 22. The opportunity has been clear for two years and still essential software breaks.
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.
https://corporatefinanceinstitute.com/resources/management/e...
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.
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.
> 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.
Pepsi makes more revenue compared to Coke. Shouldn't it be Coke who should be trying to do what Pepsi is doing?
0: https://www.wfaa.com/article/news/local/us-soda-rankings-cok... 1: https://www.investopedia.com/ask/answers/060415/how-much-glo...
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.