Downside at NVIDIA (and the Nasdaq at large)

<p><pre><code> Which means Microsoft (9% of the Nasdaq 100), is using its cash and services to power an AI company which touched $1.6billion in ARR for 2023 but is raising money at a $100 billion valuation.. (raising money at &gt;50X non-profitable sales) </code></pre> I don&#x27;t think $100b for OpenAI is that farfetched. You have way less transformative companies being valued north of $100b.<p>After playing with ChatGPT (using GPT4) and GPT4 API, I&#x27;m quite convinced that only 2 things are stopping LLMs from being ubiquitous right now and one of them is simply inference cost. The other is GPT4 being having many intentional guardrails.<p>That&#x27;s not to mention GPT5 and 6 and so on coming out.<p>You can argue that OpenAI might not hold the lead. That&#x27;s fine. But the author also argued against Nvidia. Nvidia doesn&#x27;t care if OpenAI loses the lead because the next LLM lab also uses Nvidia.<p>Note: I&#x27;m also invested in the market. Here&#x27;s my investing strategy at the moment: <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=39342028#39342362">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=39342028#39342362</a><p>I&#x27;m not a stock picking expert. But I&#x27;m investing like I&#x27;m going to lose my job as a software dev. If I lose my job, my stocks will surely pay for my food. If I don&#x27;t lose my job, then it will continue to pay for my food. It&#x27;s a hedge for myself.

Listening to finance and VC podcasts it seems to me quite clear there is a bubble brewing. They are all repeating the same mantras and convincing themselves of a new gold rush.<p>The financial side is convinced developers are 10x as productive with copilot and AI tools. They are and will increasingly be forcing CTOs to get on the copilot bandwagon or risk getting fired. The tech companies are not likely to get fooled, but your average non-tech S&amp;P 500 company is going to be giving MS a fortune.<p>AI companies are getting funded with hundreds of millions&#x2F;billions with no realistic path to making money (mistral, anthropic, huggingface). The only one making money is nVidia and MS.<p>nVidia, MS and others are frankly committing clear fraud with round tripping money and making a killing.<p>When there is billions being spent on ventures with no business model we are repeating the dotcom bubble. I bet it is going to last a while yet though so plenty of money to be made before the inevitable.

I only think of 3 things that can happen:<p>1. AI becomes so good that I will be out of a job as a software dev<p>2. AI becomes really good and I will 10x my productivity<p>3. AI hits a hard ceiling and it might only make me 2x more productive<p>Based on those 3 possibilities, I invest my portfolio like this:<p>1. 40% goes to the main layer of the AI revolution which are chip manufacturers which is mostly TSMC &amp; Nvidia. I throw some money at Intel as well because geopolitics. If AI is ubiquitous, then we need a lot more silicon.<p>2. 30% goes to the next layer which is mostly Microsoft, Apple, Google, etc. These are the companies close to consumers. I don&#x27;t know which one will win out so I spread it across.<p>3. 30% goes to S&amp;P 500 because productivity increase will benefit all industries. Also, if AI hits the ceiling fast, at least I will have 30% of my money in S&amp;P 500 and not AI bubble companies.<p>I basically invest like I&#x27;m going to lose my job. If I don&#x27;t lose my job, great. If I lose my job, that means my stocks will have to pay for my food.

One perspective I find interesting is how fast Microsoft grew in the desktop pc area:<p><a href="https:&#x2F;&#x2F;twitter.com&#x2F;marekgibney&#x2F;status&#x2F;1753116011681968552" rel="nofollow">https:&#x2F;&#x2F;twitter.com&#x2F;marekgibney&#x2F;status&#x2F;1753116011681968552</a><p>Back then, for over 10 years, it grew at a pace not seen since then.<p>If Nadella grows Microsoft into the AI area as fast as Gates did in the Desktop area, it would become a 100 trillion dollar company within the next ten years.<p>Is AI a step forward for productivity as big as desktop computers were back then? I think it might be. Not sure what percentage of people became more productive via PCs. And how much more productive they became. But with AI, it seems everyone will benefit from it. And become twice as productive or so within the next 20 years.<p>Programming without an LLM at hand would already feel very clumsy to me these days.

&gt;Which means Microsoft (9% of the Nasdaq 100), is using its cash and services to power an AI company which touched $1.6billion in ARR for 2023 but is raising money at a $100 billion valuation.. (raising money at &gt;50X non-profitable sales)<p>I&#x27;ve been saying it for quite some time. The end game of ChatGPT (and similar) services is: 1- Get people used to them so much they can&#x27;t function without them (without massive drop in productivity, inconvenience etc) 2- Raise the price 3 orders of magnitude 3 -Profit<p>This only works if open source models are so far behind to be essentially unusable as a replacement and traditional internet search becomes completely useless(it has been heading in that direction for a while by now).

Current NVIDIA stock is a classic example of a gamma squeeze. If a market maker is short a call&#x2F;put, he is hedging with stock in the direction of the movement. If you buy out of the money calls(i.e NVDA stock is at 500 and you are buying a 520 call), especially shorter dated ones, then the market maker will end up supporting a rally if it comes around via hedging(this is also exacerbated by the fact that retail, which is the segment of the market usually &quot;aping&quot; into OTMs, doesn&#x27;t actually trade the vol component of options, meaning that they don&#x27;t sell short stock as it goes higher).

Internet investment advice... If the writer was any good, they would quietly invest their money based on their predictions (such as shorting the &quot;bubble&quot; stocks) rather than provide advice for free to everybody else.

I am at max leverage and all in so I need this rally to keep going.

The problem isn&#x27;t in the stock market, the problem is the excess production. Trying to boost the economy has the exact opposite effect, and makes everything even worse. You need to slow it down, and boost spending instead.

The nasdaq is 1500 companies, seems the article is about the Mag7. People are putting money back in the sector, it may not be MS or Nvidia, but the money will move to the next big thing that pops up in the nasdaq

I don&#x27;t see it as a bubble at all. Investors see that generative AI has a lot of potential, and invest in the companies that are likely to benefit from it. That&#x27;s how stock market is supposed to work.

Valuations won&#x27;t keep up with the future, it seems.

So far most of the use cases of AI I see in the wild has been some stupid chat bot, replacing specific job groups or magically solving a problem with AI.<p>All of these attempts fail miserably. It‘s Blockchain and NFTs all over again. The promises are so far fetched from current capabilities that it is not even funny.<p>Not saying that AI is useless, there are many impressive achievements made possible by it, but I do think it’s currently overhyped and filled with empty promises.

&gt; The Nasdaq is in an A.I.-led bubble<p>This^^ title is editorialized and possibly deliberately misleading. Article ends with:<p>&gt; I will start working on a piece that will assess whether the NASDAQ (primarily) and hence passive investing as a whole is in a tech and AI-infused reflexive bubble.

Started out an interesting read, but lost credibility with me with the &quot;Hold Up&quot; Gif.