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Comment by gizmo | Hacker News Reader

Very unlikely. Big crashes occur when businesses sell hot air or cook their books. NVidia is overpriced but they are also the sole producer of the world’s most advanced AI chips. I can’t see any scenario where demand for AI chip levels off in the coming years. The worst case scenario is NVidia’s profit margins hurting because competitors hit the market sooner than expected. But even when that happens NVidia will still be worth a trillion. Hardly an epic crash.

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I think it is quite possible that NVidia's customers[1] are the ones selling hot air. If those customers go away then it turns out that NVidia made legitimately huge profits today, but it was still based on hot air, and their future profits are much smaller just of necessity. It is possible that someone will figure out a good monetization for LLM's, but I'm not aware of any existing yet, which is why I think this is a possible outcome. At least figure out monetization soon enough and with enough free cash flow thrown off that the business case closes with fancy, super expensive accelerators rather than just regular CPU's, which will Moore's Law up eventually.

NVidia is getting rich following the old "in a gold rush, be the ones selling picks and shovels" aphorism, and when the gold rush ends, you still have your money, but the discounted future profits might well be much smaller than you expected.

1: I don't think it would necessarily hurt NVidia, but I do think it might hurt their suppliers. I would be very curious as to how much of the current fab boom across TSMC, Intel, United Micro, Samsung etc. is based on assumptions about AI demand continuing to grow. Those companies would be the ones I would expect to suffer if the demand doesn't materialize because those fabs are going to be ridiculously expensive if they don't keep their order books full.

For comparison, in the first dotcom boom, Sun and Cisco did extremely well as infrastructure providers, and subsequently suffered disproportionately.

Semiconductors are a cyclical industry. Undersupply followed by oversupply. Boom and bust. Feast and famine. But demand for semiconductors has gone up, albeit cyclically, for 6 decades. Not a trend I would bet against.

Every car will get AI chips, every laptop, every server, every phone, and many home appliances. And I expect people will eagerly upgrade their electronics to get the faster AI chips in the decade to come.

Will it be a AI accelerator chip or just a regular CPU, which after X number of years of Moore's Law development will be as powerful as a H100 is today? Can you charge that much extra for it in X years, if you are NVidia?

At a certain point the AI chip market disappears and it's absorbed into general purpose computing.

Demand for AI chips is predicated on those chips producing value for their customers. But are there any AI products that are generating significant revenue yet? If those fail to materialize there will be a gigantic crash.

kinda seems obvious application people are going to be able to generate revenue from this, but maybe i'm an idiot

The challenge isn't just to generate revenue, but to generate a TON of revenue that justifies the massive investments these companies are making. It's not obvious to me that any of these products are going to be as successful as the market needs them to be.

The massive capital investments are mostly coming from companies that are going to be selling these as services, so not necessarily the product builders themselves. I think there will be a lot of products finding revenue coming.

Cost savings in marketing, advertising are already substantial. Large businesses are running pilots with on-premises LLMs with promising results.

Aaron Levie of Box.com has been outspoken about it:

https://x.com/levie/status/1793479934645842141

My take on this: AI is real, and AI products are adding significant value, but this will not show up as revenue gains for companies. Companies have no choice but to invest in AI to remain competitive in terms of costs. Consumers will realize a lot of this value as reduced prices.

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