And I can't name several customers with very deep pockets working on their own chips to squeeze/compete with NVDA.
Although I hear VCs are working on an algorithm where they burn money directly and the smoke patterns represent the solution to the multiplication. That might keep the margins high.
This has been bothering me for some time now. It’s rather obvious to me, as an engineer, which startups are well positioned and which aren’t… Do VCs really have no standard for due diligence, do they really just not care, or is there something else at play that I’m missing…?
As an exercise, imagine you have a portfolio which will in a typical year lose around 1.2% to the tax man for capital gains. Rather than accepting the guaranteed loss of taxes - you take ludicrous bets on asset classes where you can be guaranteed to book a loss which could be harvested for tax purposes, or will return 100x your investment (at which point you don't care about the tax man).
Viewed in this light, the VC preference for burn bright and burn fast startups makes sense. The worst case scenario for some LPs would be to still have money leftover.
(As a general rule of thumb, I'm deeply suspicious of any 'it's a tax write-off' explanation for people losing money: its extremely rare for losing money to make someone better off overall. It may be advantageous for them to move around where and when they say they are losing money, as you'll generally be more tax-efficient if you make money consistently and through activities in areas which are not as highly taxed, but it's not generally a useful strategy to light cash on fire to reduce your tax bill: you tend to be out of more money than you save on tax)
Depending on the stage, investors don't care about any of the details except for the founders ability to raise the next round and their probability to IPO at a later/advanced stage. The stock is the product and whether you are selling a real time machine or a crystal is irrelevant.
Which is not that "insane" really. If that's how money is being made, and investors are in the business of making money, then that's the path they are going to take.
This is the right answer, some people think that the dot-com bubble and mortgage bubble is something for investors to regret, when in fact they made such a ridiculous amount of money they're just searching for the next bubble. Not the next great product.
If that's your belief, then thinking it's risky and you may lose your shirt requires believing that you may not be smart. Which is a tough thing to accept for a lot of people, especially ones who think investment success is all about smarts and not luck.
We all know there is no 'sure thing' when investing, but if you're a large money manager, you generally want to maximise profits, looking through history, the 'quickest' earners are usually always those from OP, speculation, market share and IPO.. The 'bubble' of these seems to be loosing air but I'm purely speculating based on the tech job market so I could be completely wrong.
(which basically means that if the conditions mean that the optimal strategy in the market is to basically just run pump-and-dump 'greater-fool' scams on everyone else then that's what you'll see occur)
I'm not sure if you are taking into account that VCs are remunerated largely on the amount of money they invest rather than the results?
Sure, but is it really worth just spraying a firehose of money across a variety of entities without trying to investigate them at all? It just seems that they could still realize outsize returns and save hundreds of millions as well…
VC don't really care about the startup's product. Your pixel machine. That's a side effect.
Growth. Exit. IPO. Those are the 3 words they want to hear.
IPOs aren’t happening in this market… Are IPOs still the only thing investors are looking for?
So I assume you are a multi-billionaire, right?
Thank you.
Usually access and funds is _harder_ to find than alpha. So what’s more important is finding alpha (or whatever metric you are benchmarking against) that you can operationalize even if it’s worse on a risk adjusted basis than some other trade you can’t do.
Precisely, it’s about playing the hand that you have. My curiosity is why VCs are so indiscriminate with their funding. That said, if I had access to billions in capital to invest, maybe my perspective would be different.
The Theranos saga should give you the answer you're looking for.
Something like the 4 hour work week. What Idea would you want to suggest me as you are an engineer.
Since, you are an engineer, and it seems obvious to you which startups are well positioned, It seems that you can reason out which trends in startups are well positioned for my specific use case.
I will pay you 100$ of my first income from such a project if it really fulfills what you are saying.
That's literally crypto, right?
Google, Amazon, and Microsoft all have custom ASIC and TPU projects in their pipeline, and what holds true today might not hold true in 5 years.
A major reason Nvidia was able to do so well was because of technical outreach by donating their GPUs to programs all over the US, building a strong albeit self serving OSS relationship, the CUDA ecosystem, and the acquisition of Infiniband.
Much of these advantages can be nullified by competitive margins and pricing for hyperscalers designed and owned hardware.
Cisco was hit by this same situation as server vendors like Dell began integrating their own in-house networking functionality within their servers, and Dell itself was outcompeted by cloud vendors.
By rights they should have been fast followers, but they stacked the critical mistakes so high that frankly I think NVIDIA's subsidized GPGPU classes are the smaller part of this story. If the people struggling to get OpenCL to work had been able to get it to work (on other than NVIDIA GPUs lol) the situation would look very different today.
You can certainly have success while avoiding high PE stocks, but you are on a site about startups and your name suggests you work in the tech sector, which are both places where high PE often does make sense and it pays to be familiar with the reasons.
No. Just having competition is enough to destroy the expectations on TSLA.
And realistically, they are abut last on that race, being thrown out of track about a decade ago and never managing to make anything work since then. So, yeah, betting on no competition is a very weird option.
I'm not in that circle of clientele though so I don't know: are any of these now seen as the luxury electric car?
But the market of luxury cars isn't enough to sustain a company with the valuation of Tesla. If interest rates ever stay non-zero, they will need to take almost the entire cars market worldwide, or something else with similar size.
I saw the low-tech version of this in Honiara: Western expat buys a cheap car. Driver is hired to take kids to/from school, but in lieu of payment, driver is free to run a taxi service as long as he makes his school commitments.
One time having a drunken stranger puke in your car while you’re not using it will be enough for a lot of people to determine it isn’t worth the hassle.
It’s pretty easy to imagine a number of scenarios that disabuse the nothing of ever renting your car out “no hassle”. Low hassle maybe, but your framing implies you’ve never worked in a job that required engaging the general public.
How do you rationalize Tesla being valued higher than the combined valuation of the next ten car companies? They will be the only one left standing?
In all, it’s unfortunate that the US’s most prominent electric vehicle manufacturer is wrapped up in so much noise. Competition is only going to stiffen.
Net income is down 70% year over year and they are now losing money.