The crash is absolutely rational; the cascading effect highlights the missing moat for companies like OpenAI. Without a moat, no investor will provide these companies with the billions that fueled most of the demand. This demand was essential for NVIDIA to squeeze such companies with incredible profit margins.
NVIDIA was overvalued before, and this correction is entirely justified. The larger impact of DeepSeek is more challenging to grasp. While companies like Google and Meta could benefit in the long term from this development, they still overpaid for an excessive number of GPUs. The rise in their stock prices was assumed to be driven by the moat they were expected to develop themselves.
I was always skeptical of those valuations. LLM inference was highly likely to become commoditized in the future anyway.
It has been clear for a while that one of two things is true.
1) AI stuff isn't really worth trillions, in which case Nvidia is overvalued.
2) AI stuff is really worth trillions, in which case there will be no moat, because you can cross any moat for that amount of money, e.g. you could recreate CUDA from scratch for far less than a trillion dollars and in fact Nvidia didn't spend anywhere near that much to create it to begin with. Someone else, or many someones, will spend the money to cross the moat and get their share.
So Nvidia is overvalued on the fundamentals. But is it overvalued on the hype cycle? Lots of people riding the bubble because number goes up until it doesn't, and you can lose money (opportunity cost) by selling too early just like you can lose money by selling too late.
Then events like this make some people skittish that they're going to sell too late, and number doesn't go up that day.
One thing you’re missing is that there’s nothing that says the value must correct. There are at least two very good reasons it might not: Nvidia now has huge amounts of money to invest in developing new technologies, exploring other ideas, and the other is that very little of the stock market is about the actual value of the company itself, but speculation. If people think it will go up, they buy it, reducing supply, and driving up the price. If people think it will go down, they sell it, increasing supply and driving down the price. It is a self-fulfilling prophecy on a large scale, and completely secondary to the actual business.
> Nvidia now has huge amounts of money to invest in developing new technologies
This is not actually a reason for investors to invest in a company, because it's caused by investors investing in the company. If the market would invest in some other company instead then that company would have huge amounts of money to invest in developing new technologies. Meanwhile the ones that tend to succeed in that are more often new, nimble companies breaking into or creating a new market rather than large established ones with bureaucracy, internal politics and fear of cannibalizing existing sales.
Example: If there is a popular new application for consumer GPUs that requires a lot of VRAM, a competitor could make a lot of money by developing consumer GPUs with a lot of VRAM, but Nvidia would have to worry about that eroding sales of enterprise GPUs. Then investing in the competitor could have a better return, both because of potentially higher growth (people invest $5B in developing the GPU and then it becomes a $100B+ company, huge ROI; very little chance of Nvidia going from $3T to $60T), and because when it happens it comes at the expense of the incumbent, who loses not just the consumer GPU sales but the enterprise ones to the competitor selling for consumer prices. Which means the incumbent still has a very significant risk of losing value, but without as much potential upside.
People often try to make this argument by pointing to Microsoft or Apple, but those are major outliers who got there through anti-trust violations. Meanwhile Kodak, Xerox, Yahoo, AOL, Sears, IBM, GM, GE, etc.
> very little of the stock market is about the actual value of the company itself, but speculation
That's the hype cycle. We know which section of the graph we're on right now.
Eventually people will sell their stock to invest in some business that is actually growing or giving proportional dividends.
Of course, that "eventually" there is holding a way too much load. And it's very likely this won't happen in a time the US government is printing lots of money and distributing it to rich investors. But that second one has to stop eventually too.
It's a lot of people holding the stock, you are expecting everybody to just not do it.
Private companies are different, but on publicly traded ones it tends to happen.
(Oh, you may mean that printing money part. It's a lot of people holding that money, eventually somebody will want to buy something real with it and inflation explodes.)
Yeah the printing money bit. Generously one might even say that that’s the reason for printing more money: make sure that the value of peoples investments decays over time so there’s no need for the market to crash to “get the money back out”.
Related to your #2. I mentioned this elsewhere yesterday, but NVDA's margins (55% last quarter!) are a gift and a curse. They look great for the stock in the short term, but they also encourage its customers to aggressively go after them. Second, their best customers are huge tech companies who have the capital and expertise (or can buy it) to go after NVDA. DeepSeek just laid out a path to put NVDAs margins under pressure, hence the pullback.
2) Seems the most plausible, but how to value the moat, or, how long / how many dollars will it cost to overcome the moat? The lead that CUDA currently has suggests that it's probably a lot of money, and it's not clear what the landscape will look like afterwards.
It seems likely that the technology / moat won't just melt away into nothing, it'll at least continue to be a major player 10 years from now. The question is if the market share will be 70%, 10% or 30% but still holding a lead over a market that becomes completely fractured....
I think the analysis of (2) is too simplistic because it ignores network effects. A community of developers and users around a specific toolset (e.g. CUDA) is hard to just "buy". Imagine trying to build a better programming language than python -- you could do it for a trillion dollars, but good luck getting the world to use it. For a real example, see Meta and Threads, or any other Twitter competitor.
You have a trillion dollars in incentive. You can use it for more than just creating the software, you can offer incentives to use it or directly contribute patches to the tools people are already using so they support your system. Moreover, third parties already have a large motivation to use any viable replacement because they'd avoid the premium Nvidia charges for hardware.
You could apply this analysis to any of the other big tech innovations like operating systems, search, social media, ...
MS threw a lot of money after Windows Phone. I worked for a company that not only got access to great resources, but also plain money, just to port our app. We took the money and made the port. Needless to say, it still didn't work out for MS.
Those markets have a much stronger network effect (especially social media), or were/are propped up by aggressive antitrust violations, or both.
To use your example, the problem with entering the phone market is that customers expect to buy one phone and then use it for everything. So then it needs to support everything out of the gate in order to get the first satisfied customer, meanwhile there are millions of third party apps.
Enterprise GPUs aren't like that. If one GPU supports 100% of code and another one supports 10% of code, but you're a research group where that 10% includes the thing you're doing (or you're in a position to port your own code), you can switch 100% of your GPUs. If you're a cloud provider buying a thousand GPUs to run the full gamut of applications, you can switch what proportion of your GPUs that run supported applications, instead of needing 100% coverage to switch a single one. Then lots of competing GPUs get made and fund the competition and soon put the competition's GPUs into the used market where they become obtainium and people start porting even more applications to them etc.
It also allows the competition to capture the head of the distribution first and go after the long tail after. There might be a million small projects that are tied to CUDA, but if you get the most popular models running on competing hardware, by volume that's most of the market. And once they're shipping in volume the small projects start to add support on their own.
Why can’t you just build something that’s CUDA-compatible? You won’t have to move anyone over then. Or is the actual CUDA api patented? And will Chinese companies care about that?
AFAIK, CUDA is protected. There are patents, and the terms of use of the compiler forbids using it on other devices.
Of course, most countries will stump over the terms of use thing (or worse, use it as evidence to go after Nvidia), and will probably ignore the patents because they are anticompetitive. It's not only China that will ignore them.
AMD is actively working to recreate CUDA. "Haven't succeeded yet" is very different from having failed, and they're certainly not giving up.
Intel's fab is in trouble, but that's not the relevant part of Intel for this. They get a CUDA competitor going with GPUs built on TSMC and they're off to the races. Also, Intel's fab might very well get bailed out by the government and in the process leave them with more resources to dedicate to this.
Then you have Apple, Google, Amazon, Microsoft, any one of which have the resources to do this and they all have a reason to try.
Which isn't even considering what happens if they team up. Suppose AMD is useless at software but Google isn't and then Google does the software and releases it to the public because they're tired of paying Nvidia's margins. Suppose the whole rest of the industry gets behind an open standard.
A lot of things can happen and there's a lot of money to make them happen.
While we can bet on "AMD are too sclerotic to fix their drivers even if it's an existential threat to the company", I don't think we can bet on "if we deny technology to China they won't try to copy it anyway".
You don't need external competition to have NVDA correct. All it takes is for one or more of the big customers to say they don't need as many GPUs for any reason. It could be their in house efforts are 'good enough', or that the new models are more efficient and take less compute, or their shareholders are done letting them spend like drunken sailors. NVDAs stock was/is priced for perfection and any sort of market or margin contraction will cause the party to stop.
The danger for NVDA is their margins are so large right now, there is a ton of money chasing them not just from their typical competition like AMD, but from their own customers.
The crash of NVIDIA is not about the moat of OpenAI.
But because DeepSeek was able to cut training costs from billions to millions (and with even better performance). This means cheaper training but it also proves that OpenAI was not at the cutting edge of what was possible in training algorithms and that there are still huge gaps and disruptions possible in this area. So there is a lot less need to scale by pumping more and more GPUs but instead to invest in research that can cut down the cost. More gaps mean more possibility to cut costs and less of a need to buy GPUs to scale in terms of model quality.
For NVIDIA that means that all the GPUs of today are good enough for a long time and people will invest a lot less in them and a lot more in research like this to cut costs. (But I am sure they will be fine)
This is partially why Apple is the one that stands to gain more, and it showed.
Their "small models, on device" approach can only be perfected with something like DeepSeek, and they're not exposed to NVIDIA pricing, nor have to prove investors that their approach is still valid.
I keep seeing this argument, but I don't buy it at all. I want a phone with an AGI, not a phone that is only AGI. Often it's just easier to press a button rather than talk to an AI, regardless how smart it is. I have no interest in natural language being the only interface to my device, that sounds awful. In public, I want to preserve my privacy. I do not want to have everyone listening in on what I'm doing.
If we can create an AGI that can literally read my mind, okay, maybe that's a better interface than the current one, but we are far away from that scenario.
Until then, I'm convinced users will prefer a phone with AI functionalities rather than the reverse. It's easier for a phone company to create such a phone than it is for an AI company.
Perennial reminder that we do not have any real evidence that we are anywhere close to AGI, or that "throwing more resources at LLMs" is even theoretically a possible way to get to an AGI.
"Lots of people with either a financial motivation to say so or a deep desire for AGI to be real Soon™ said they can do it" is not actual evidence.
We do not know how to make an AGI. We do not know how to define an AGI. It is hypothetically possible that we could accidentally stumble into one, but nothing has actually shown that, and counting on it is a fool's bet.
Lisp is one of the oldest programming languages developed in the 1960, it came before and is very elegant actually. You can write incredibly powerful things with this pattern and it's also really simple to build an interpreter for it with the stuff they had at their disposal at the time.
You are totally right, the whole statement is ironically antisemitism here on Hacker News: Facebook/Mark Zuckerberg and Israel.... what is the connection. It's clear the poster is on X/Twitter and you can see what Elons behaviour perpetuates.
Elon Musk doesn't know how the advertising business works, get's rid of moderation and let's banned people back. Which obviously leads to an increase of antisemitism on Twitter and the ADL justly fights against it.
Now after the lawsuit this guy thinks: Elon is a genius, it must be the jews who control the media who have prejudices against Elon and his management.
You talk about Elon and Twitter users like some specific people talk about Soros and the Jews. Both are a form of blaming groups of people for some random, different person deeds. Not acceptable.
Just from the wording my quick judgment is that ADL is the bully here. You can't walk around calling people "unrepentant bigots", and doing that in public is IMHO indeed defamation, which Musk is suing for.
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If it is a medium of exchange, all the attention never made a lot of sense.
The use cases are niche; that's the thing. Venezuelans who avoid inflation and ordering illegal drugs are not a trillion-dollar business. All the legal/regulated areas mean competing with existing financial infrastructure, which is low margin and incredibly competitive.
So if you see the space as a whole, it never had the potential market to begin with to justify those valuations. It was fuelled by low-interest rates, speculators, and venture capital.
It was, in retrospect, simply a bubble, and some people feared missing out after some became insanely rich with it.
Historically speaking it was nothing special: Tulips, new economy, real estate and now it was crypo.
When you are in it, invested people always tell you why it is different this time. The underlying economics stay the same; value creation is usually incremental and hard.
> Otherwise most people here would have stuck $100 in to BTC at $10.
Bwahahaha!
You guys really need some humility, you'd think the stock market and by extension your collective portfolios, but particularly tech growth stocks losing +60% (including FAANGS) would do it, but until you guys get rolled into the mass tech layoffs and get a taste of what living precariously due to extermal economic crisis' is like will you understand what a self-serving bubble you've all been living in. The level of self-delusion isn't just cringe, it's honestly the cruel self serving narcissism that explains the 'how and why' the Valley looks like the cesspool that it does: financial inequality, mass poverty, rampant substance abuse and poor mental health are all the costs of entry so we tech titans can make billions of go-no where apps like Doordash burning VC money. But we get to tell ourselves we're above everyone else because we're rewarded with foosball and free snacks in our workplace.
With that said, a market correction was necessary and admittedly my timing was off (I felt a 50% correction was about right in early May, I felt it was the bottom), and we needed to clear out the mess just like the ICO craze; this is just next wave of mal-investment being cleared seen in a healthy market and if you want to know the truth: it's in bear markets that this is when the tech gets built--lots of exciting things are being built in layer 2, as well as continuing to reduce the network's energy use on fossil fuels. These yield farms were the biggest scams and we told people that NYKNYC for a reason.
But, you wouldn't know that because you've apparently convinced yourself that your clairvoyance has imbued you with a divine vision of some sort... seriously, stop drinking the kool-aid guys, it's why the satire in Silicon Valley (series) hit so close to home.
You describe the current entrenched system with such horror which… well, a bit one sided but not complete wrong either.
The only problem is that it’s displacement by a market resembling the crypto one currently in collapse would be worse in every single way.
Just take investment portfolio loss that you mention: a tech heavy portfolio that lost 60% this year, if the investor is long anyway, may recover a bit or completely by the time they need to cash out. I’m far ahead of any temporary losses over the decades.
In contrast, even a portfolio long on crypto is still irrevocably (mostly or completely) gone if it was held at the FTX exchange.
Turns out “too big to fail” may actually be a bit of a bug and a feature, while crypto has, for the foreseeable future, demonstrated it’s simply not worth saving. Considering the contagion FTX will have, it should be concerning that Binance might simply not have been stable enough itself to step in. It should concern anyone with holdings with Binance that they made such a big deal about stepping in and then backed out, possibly just could handle it on top of their own shaky foundation.
Maybe some current coins should have a future but the entire ecosystem surrounding them is rotten and needs to be torn down, the ground salted, and then filled with people less blinded by hype and shiny tech and more understanding of how a financial system interfaces with a real world economy and, the masses of people live in it every single day.
> You describe the current entrenched system with such horror which… well, a bit one sided but not complete wrong either.
Because one should, how we went from the 90s Cypherpunk culture taking over SV to this is abysmal situation is stark and it can be attributed to this vile outlook on 'the other' who in their view didn't work hard enough to get to the right university, learn o code and get the right degree to paper signal mega corps or time the many financial crisis that makes their economic outlook as bleak as it is--especially for millennials and gen z who were sold a lie about what university would entail and have so much unpayable debt regardless of the outcome.
> Just take investment portfolio loss that you mention: a tech heavy portfolio that lost 60% this year, if the investor is long anyway, may recover a bit or completely by the time they need to cash out. I’m far ahead of any temporary losses over the decades.
First, it's +60%, netflix is still the loss leader in FAANG and hit a low of -72% from it's ATH in the early summer; there is nothing good to say about META either or the rest. Since other than Apple, who really should suffer more from perpetual zero covid policy uncertainty in Schenzen, should also be hurting by now since the Chips being made in the US will likely require higher end costs for their devices, but some how isn't...proving that the stock market can stay irrational longer than one individual can stay solvent.
> In contrast, even a portfolio long on crypto is still irrevocably (mostly or completely) gone if it was held at the FTX exchange.
Sure, but that is like saying that the entire model behind investing in publicly traded companies is entirely worthless because Robinhood wouldn't let you buy Gamestop; when the culpability lies solely wit Robinhood or FTX and similair custodial exchanges in this specific case. The mantra is and always has been in the Bitcoin community that you can only own those tokens if you are in sole possession of the private keys, and the entire history of exit scams has proven why.
Evey new adoption phase has people who get into these things headlong without asking why/how they function, most get burned in the process but learn the value of monetary sovereignty in the process it's like a stupid tax of sort among those ready to take personal responsibility and it's who who ultimately benefit the most from this. Yield farming was the most blatantly criminal since ICOs and it's actually good that they're being destroyed, whether it was 3-arrows, Celsius, or now FTX.
Hell, I'm probably more critical than you as I want YC backed Coinbase to get destroyed, too because of how bad practices they have and what a net negative they have been in all but maybe the first years of their existence and have been mired with a legacy of perpetual incompetence and maliciousness.
> Turns out “too big to fail” may actually be a bit of a bug and a feature, while crypto has, for the foreseeable future, demonstrated it’s simply not worth saving. Considering the contagion FTX will have, it should be concerning that Binance might simply not have been stable enough itself to step in. It should concern anyone with holdings with Binance that they made such a big deal about stepping in and then backed out, possibly just could handle it on top of their own shaky foundation.
That's at best conjecture on your part, and I'm pretty sure you benefited from these bailouts if you feel that way, most of us didn't so maybe you can see why we hold such views. CZ is a conman, and if he says 'fundus are safu' and you believe it because you wanted to keep your funds on there for trading purposes that is YOUR fault, not anyone else's, much less the networks that still remain functional despite the increase or decrease of market volatility.
> Maybe some current coins should have a future but the entire ecosystem surrounding them is rotten and needs to be torn down, the ground salted, and then filled with people less blinded by hype and shiny tech and more understanding of how a financial system interfaces with a real world economy and, the masses of people live in it every single day.
Personally speaking, other than Bitcoin and a few privacy coins like Monero I don't see anything worth much in the crypto currency ecosystem, ETH and Vitalik have been running the same scam as FTX due to cult of personality; but that is fine if we believe in truly free-markets, experimentation in the market place of ideas is critical for innovation, which means many will fail. You make it sound like VC isn't playing the same same where 99% of all startups fail.
My main contentions is that the way most of you see FTX as a 'crypto bro' who pontificates about saving the World by yield farming, when most of us told people it's the stupidest way to get rug-pulled, is ironic because that is who most of the non-tech World views Silicon Valley. Hence the the 'making the World a better place' meme when the Valley is the utter epitome of the dystopic techonocracy that cyberpunk genre is based on: in short, FTX and SBF is a tech bro more than he ever was a valued member of the Bitcoin or any crypto currency community for that matter. Like I said, I thought he was going to end up in a CIA/FBI black-site when he got involved in lobbying politicians before I was informed of his family's connections, at which point it was clear the ilk that makes for Stanford-ites.
Thank you for an extremely thoughtful reply! I’ll be honest, I don’t have the time or attention span to go back and forth again but I also don’t think that’s necessary. You’ve given me some good things and valid reasoning to think about, and I will! So, a good discussion and exchange of ideas. Thanks!
The market doesn't care whether you understand it. So long as you pull your money out before the bubble deflates back to or below the level at which you initially invested, you will make money. There is a risk that the bubble could just pop when the public gets cold feet, but "the market can stay irrational longer than you can stay solvent" cuts both ways.
The primary problem with bubble economics is ethical, not utilitarian. Just like in a casino, every dollar you make in a bubble is a dollar someone else has lost (or will lose when they cash out too late).
Yes. When it immediately went up by 10x or so shortly after I bought it, I sold enough to get my initial "investment" back. Then sold some off and on over the years.
Wait for a global ban on cash. Suddenly the only thing that will left for your finance to stay private will be crypto but some truly private (not like majority privacy coins) & decentralised one or something like this on top of Bitcoin.
Everything is a bubble until it outlasts critics.
People hiding their wealth before marriage are a bigger market than drugs or hedging inflation.
If BTC would be extended with only one feature - transfering users funds not touched for a year to an auto lottery pool distributing funds to Bitcoin transaction makers randomly, BTC would become the biggest casino on earth.
BTC & crypto competes with these institutions. Why do you have cheaper international transfers now? Legacy fin infrastructure is a joke.
That's why cryto took off so easily.
Soon you may have a fully digital dollar/eurodollar which itself already is a global & free to use digital ledger, just with centralised issuance and link to oil & US securities.
The early stage of Theranos wasn't really a scam, they tried to build the actual product. The scam started when they failed to do so and then lied about it.
You can replace the battery for a fraction of a new one, I basically have that already.
My second battery of my 6s now makes trouble again, no other issues. I struggle to come up with a good reason why I shouldn't get a new battery for another 2 years.
I don't think metrics like P/E ratio are as useful as before any longer when analyzing companies like this. The FED printing money and lack of other investments in this zero-interest rate economy has a significant role in raising stock/asset prices.
NVIDIA was overvalued before, and this correction is entirely justified. The larger impact of DeepSeek is more challenging to grasp. While companies like Google and Meta could benefit in the long term from this development, they still overpaid for an excessive number of GPUs. The rise in their stock prices was assumed to be driven by the moat they were expected to develop themselves.
I was always skeptical of those valuations. LLM inference was highly likely to become commoditized in the future anyway.
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