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Comment by tl2do | Hacker News Reader

Instead of pouring more money into OpenAI and Anthropic, Nvidia should invest more in expanding production capacity for the RTX 5000 series and future generations. High-end consumer GPU availability is still constrained, especially for the RTX 5090, and street prices remain elevated. Nvidia should come back to the consumer side.

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Datacenter income for nVidia last quarter was something like 62B vs the gaming market of <4B. While not quite a rounding error, it feels like the gaming market is just too small for them to put more resources toward it for us consumer folks.

https://nvidianews.nvidia.com/news/nvidia-announces-financia...

It is insanely stupid that '4B' with a B, is 'too small' of an operating space.

The absolute value is irrelevant - it's the opportunity cost that determines this.

It doesn't matter if the consumer market is 4T, if the AI market is 60T!

“I wouldn’t pick up $20 if there was $100 on the ground!”

Most people would pick up both.

These economic proclamations don’t seem to make sense, when applied to different contexts — which suggests what you’re saying might be folk wisdom rather than sound theory (and greatly over simplifying the problem).

You’re also discounting ecosystem effects — gaming GPUs driving demand for datacenter and workstation GPUs as hobbyist experimentation turns into industrial usage. We don’t know what would happen if nVidia stopped suppressing the GPU market, because it’s never been tried — nVidia has always viciously undercut their own grassroots.

The problem is that Nvidia cannot make infinite amounts of chips so they actually can't pick up both.

> “I wouldn’t pick up $20 if there was $100 on the ground!” Most people would pick up both.

No, it’s more like there’s a massive pile of both $20s and $100s on the ground. You wouldn’t waste time running between the two, you’d focus on the $100s

If I have a garbage bag, I'm shoving everything in there.

> Most people would pick up both.

if you're within reach of both, then it's not a choice, and there's no opportunity cost in picking just one - you'd be taking both.

If not within reach of both but just one, and you picking one up means someone else might pick up the other, then which would you choose? The other is then by definition, the opportunity cost.

nVidia is sitting on a huge pile of cash, ie, they’re not constrained by resources — hence the framing as a choice.

cash cannot buy more fabs. ASML machines are the constraint, plus TSMC's capacity is a constraint.

Not to mention that nvidia's cash pile isn't magic - they should not overpay for capacity; they're better off returning cash to investors in that case.

If you were carrying heavy shopping in both arms would you stop to pick up a quarter?

A dollar?

I wouldn't pick up either even with empty hands. No idea where they've been. Maybe a fiver, a twenty sure. At that point I'd put down my bags and grab both.

You’re standing on a traffic island in the middle of a busy road. The lights change allowing you to cross. On one side there is a $20 note, on the other there is a $100 note. Which side do you go to first?

One strategic reason is to remove oxygen from competitors. Otherwise someone will scoop up the gaming market and put the proceeds into developing technology to compete with NVIDIA in the more lucrative AI space.

I wonder who is going to fill the gaming market if AI market focused companies would simply outbid them during manufacturing? All available and not yet available manufacture is pivoting to AI market

That is not substantiable. AI bubble is wealthy hype like a single drop of blood can be used to validate 100 different diagnostic test. Reality is parts per million fails this along with reusable medium. Wealth latches to idiocy.

Gaming and CAD market are real expectations that latch to reality. Grow the education systems and grow both. So is matrix math, such as hashing.

AI has reached a state of software issue, not hardware. And the divergence of AI hardware does not equate to CAD and Gaming math.

How many of the last ten years have had some kind of "temporary" GPU shortage? It was crypto, now it's LLMs, who knows what's next?

The only winning strategy for these guys is to exploit the market for all it's worth during shortages and carefully control production to manage the inevitable gluts.

> AI has reached a state of software issue, not hardware

Citation very much needed.

At the very least, OpenAI seems to believe more and larger datacenters is the path to better models... and they've been right about that every time so far.

Moreover, all the frontier labs and hyperscalers are capacity constrained, and will be for the foreseeable future.

>OpenAI seems to believe more and larger datacenters is the path to better models...

Does that mean they produce better slop, or more slop faster?

Better slop. The effect that these systems get better as you scale up [0] is real you know.

[0]: https://arxiv.org/pdf/2001.08361

Slop is still slop. There is no legitimate evidence that these systems get any better just by throwing more hardware at it. Every one of the people in this paper is involved with OpenAI, so it is very suspect in its findings.

Their story (valuation) hinges on it - therefore that’s their investment thesis when raising money.

Great, when the AI bubble bursts, they can repackage their AI chips into consumer cards! /s

I am afriad thhe GPUs chips will be often useless (to power hungry, running too hot and needing too expensive accessories) but it might be possible to harvest the memory chips and put them on useful GPU cards.

But so many gamers want to buy GPUs and can’t because they are sold out or won’t because they are super price inflated. Wouldn’t the gaming market be larger if the products were actually available and at their actual MSRP?

Nvidia can't sell 10x the number of GPUs they sell. As much as the supply issues are discussed, it would likely take them a long time to just double the market. They could try to become the vendor of choice for the PS6/next xbox, but that's a big strategy shift for again maybe double the market, not 10x the market.

On the other hand right now the market doesn't seem to think that the >60bn of datacenter revenue is going away or even going to slow down _growing_ any time soon. Just adding 10% more revenue there is worth more than doubling their GPU business which they likely can't do.

I am not saying it would be anywhere near equal, just that it would be "bigger" than 4B if it wasn't so constrained.

>On the other hand right now the market doesn't seem to think that the >60bn of datacenter revenue is going away or even going to slow down _growing_ any time soon.

I wonder why this then?

https://news.ycombinator.com/item?id=47256781

No. Enterprise customers generate vastly more revenue and profit than consumers can.

Why would they do that? They launched the DGX Spark last year with multiple hardware OEMs selling flavors of the reference device (Dell, Lenovo, Asus). That contains a desktop-sized Grace Blackwell architecture GPU (GB10), and word on the street is that they're moving into laptops this year. Their market is the same market Apple is pitching the MacBook 5 Pro/Max, too: devs wanting local models. It's not currently a large market, but it's growing quickly. It makes far more sense for Nvidia to build hardware to service this market than to overly focus on their gaming lines. RTX GPUs are sell once. GB-containing consumer devices are "sell once, but then collect recurring revenue when the workloads those developers build hit production on a cloud somewhere."

And why should a business do that? Limited chip production capacity be spent on most profitable ventures.

I should admit this is partly my personal preference. That said, gaming has been a durable market for decades, and there’s a strong cycle where better chips enable better games, which then drives more demand for better chips.

That same virtuous cycle works for their data center segment

Every GW of Blackwell generates more revenue than the entire gaming business does in 1 year.

If I were Nvidia, I would give more attention to consumer GPUs to hedge my bets. When (not if) this AI bubble pops, their AI customers will become worthless to them very quickly as they won't be buying more GPUs. And when that day comes, I would want to still have consumers to sell to, rather than have them all buying from AMD because I ignored them.

Consumer GPUs are too small of a slice of their revenue to matter to them anymore.

Gaming created Nvidia

And now Nvidia is destroying gaming

the only way this argument works is if AMD somehow creates GPUs that run circles around nvidia and boxes them out price wise, and at the same them themselves don’t start prioritizing enterprise customers more. otherwise consumers will choose the best performing gpu possible, generally people don’t care about companies turning their backs on consumers in this way

They don't need to run circles, just be close enough for a good enough price.

You saying they should have gone all in on Crypto mining?

> Nvidia should invest more in expanding production capacity

Not if they expect build out of AI data centers to slow down. Once both OpenAI and Anthropic goes public there's going to be a pressure on them to either turn a profit or at least have the stock price go up. One way that can happen, if subscriptions, government contracts and ads aren't working, is cutting back on cost. Cutting costs means doing more with the existing GPUs and datacenters and running them for longer.

Even if the both companies can turn a profit, there's going to be a pressure to not spend on datacenters, if existing facilities can be pushed harder or used more efficiently.

OpenAI and Anthropic going public is going to mean reduced spend on datacenters and GPUs.

nvidia will come back to the consumer side when the AI side stops being as profitable. Right now, it still seems like the margins for AI hardware is way higher than the same consumer product would sell for.

This leaves an opening for Intel to get in the game. Their new lines have a pretty decent value proposition for mid-tier gaming. If they focused on the higher end they would could own it. There is massive latent demand because of the NVidia situation. It’s easier to make money from than the R&D to build the next Blackwell but there is just as much demand for local/private models on the prosumer level.

Fabs are expensive, take decades to make and most important are very hard.

Nvidia designs chips, it has no production capabilities. Most of their chips are produced by TSMC and memory come from SK Hynix.

No problem with that, even if it takes force.

Their model offerings are also need some love.

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