The whole premise for this article is just wrong. The only way demand for deep learning chips will drop is if the current transformer model hits a theoretical ceiling. Otherwise you can always improve the models "for free" just by scaling compute, without any improvements in architecture or training algorithms. And since there is nothing in current research that would point to such a theoretical ceiling, everyone will be craving GPUs in the hope of beating the next guy's product in the AI race. If a paper comes out that says something like "yeah, we're no longer seeing improvements after X trillion parameters" then - and only then - can you begin to doubt the shovelmakers.
It's not a matter of them being not actually valuable. It's a matter of them being overvalued even relative to their tremendous and obvious actual value.
The companies dominating the hardware side that enables it being most valuable companies in the world is not far fetched, if you believe that AI is the next big thing after the internet. And it seems many investors believe so.
Back in December, I ran a DCF on https://www.gurufocus.com/dcf-calculator?ticker=NVDA and got a fair value estimate of around $700 based on 25%/yr EPS growth for 10 years, followed by 15 years of 5% growth and a discount rate of 8-10% (that's based on the expected rate of return you can get from the market long term).
AI stocks are like crypto in 2021. It's getting manic. The media makes it seem like companies and governments are begging to buy GPUs like there's no tomorrow. Hardware is ultimately a commodity. It's only a matter of time before supply meets demand. There's no way giant tech companies with their own ASICs will continue buying so many Nvidia GPUs.
giant tech companies are building their own ASICs... but mostly for inference. And that's the easy part.
What the market is quickly coming to realize is that actually there is no "80-20 solution" here, raw matrix math is not enough, you pretty much need the flexibility of a general-purpose GPU to do training. And there's really only a few companies on the planet in any sort of position to move into that market - NVIDIA, AMD, Intel, Tesla (Jim Keller designed Dojo for them a few years ago), and maybe a few others.
In short - GPGPU is the 20% solution already. And that's the same mistake AMD has made over and over in the GPU market as a whole too - thinking that NVIDIA obviously must be doing it wastefully and there is some cheap solution they can slide in and cover most of the benefit at less cost. And NVIDIA has usually done the math (every mm2 of silicon is tens of millions of dollars of profit lost) and is in fact not being wasteful, so the competitor comes in with a crappy solution instead of a "cheap and cheerful" one. That is what will happen with training too, for everyone besides maybe AMD (MI300X looks good) and Intel.
Also, because of the long-term ecosystem-building that NVIDIA has done, when the shit hits the fan, everyone falls back to their products. When the next major innovation comes out, it will come out on NVIDIA GPUs first, and then the market will spend another year scrambling to catch up all over again. So yeah, during the market-equilibrium periods they will make less... and then all hell breaks loose and they will be showered in money again.
GPU is just a much tougher nut to crack than it appears at first glance. It's ecosystem, ecosystem, ecosystem, but you also have to have very competitive performance (otherwise the cost doesn't work out) and power consumption etc. And NVIDIA is the first to market by 15 years (AMD still doesn't have ROCm to the starting line, as geohotz recently pointed out again) and continues to be the best and easiest. All you have to do is buy a 4060 Ti or 4090 and start playing. The competition being 10% cheaper doesn't matter if it doesn't work.
This. People talk about crazy valuations all the time. I hear about crazy Bitcoin valuations for years and recently AI, yet it is more likely Bitcoin will hit 100k than anything else.
(My personal opinion is that BTC has a fair value of close to zero.)
On BTC I absolutely agree. The value of it is directly connected to how convertible it is.
And even more so, it's clearly a inflation vacuum. Without it, inflation would be much worse.
