No. of Recommendations: 14
Infected by all the enthusiasm for Nividia, I took a tiny think-about-it position in mid-May, and then sold out three days later when I actually thought about it (chip maker, hardware, no recurrent revenue, relying at least a good part on orders from huge companies, revenue flattening out in past three quarters [$2.00 billion, $2.17 billion, $1.94 billion], earnings flattening out in last three quarters [94, 113, 85], etc etc).

I'd be curious how others who are invested in Nividia overcame these objections, or do you just feel that AI will be so big that the rest doesn't matter?

Saul
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No. of Recommendations: 3
My thesis behind NVDA is their Autonomous Driving computer chips. TSLA puts them in every car coming off their production line soon to be 500 000 to 1mill per year. That is a lot of $5000 chips. (I believe Tesla charges $8K for full functionality.)

When other car manufacturers start putting them in all high end models, this could be a huge market.

Just my thoughts.

Justin
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No. of Recommendations: 3
Saul,
I did almost exactly the same thing you did at just about the same time for the same reasons. Maybe I'm beginning to learn your game - a little.

Friday, I took a big hit, apx 4%. I'm sure I was not alone, most everyone tech heavy had to suffer. My wife was kind of upset about it. I pointed out that in one day we lost the gains of the previous week . . .
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No. of Recommendations: 4
I'd be curious how others who are invested in Nividia overcame these objections, or do you just feel that AI will be so big that the rest doesn't matter?

Saul,

I didn't look that hard. What I saw was a triple in revenue year over year with the market cap tracking the change in revenue.

Also, when I watched the long conference on Nvidia, the link is somewhere on another thread. I saw not only a company riding the wave of AI, but Big Data and server centers. I was extremely impressed with the new chip. It is able to reduce the white boxes needed in a server center by at least 80 percent for the same computing power, along with the reduction in AC and electricity and backup power.

While Nvidia is not a one customer company, there were some notable absences from the customer base that Nvidia has.

At this time Nvidia is executing. They may not in the future, but today they are. What is more, if you say the company was fairly valued a year ago, it is still fairly valued.

However, the charts have a gap. Gaps fill. I have the stomach for a 30 percent decline in price and will add at 110 a share if the market puts up a blue light special.

Cheers
Qazulight
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No. of Recommendations: 1
Infected by all the enthusiasm for Nividia, I took a tiny think-about-it position in mid-May, and then sold out three days later when I actually thought about it (chip maker, hardware, no recurrent revenue, relying at least a good part on orders from huge companies, revenue flattening out in past three quarters [$2.00 billion, $2.17 billion, $1.94 billion], earnings flattening out in last three quarters [94, 113, 85], etc etc).

I'd be curious how others who are invested in Nividia overcame these objections, or do you just feel that AI will be so big that the rest doesn't matter?


Saul,

I do believe that there was a little recurring revenue model introduced this year. I did not understand it completely and even if I did and though it was the greatest thing since sliced cheese, it would be a tiny portion of the business at this time and for the foreseeable future.

Cheers
Qazulight (Just being OCD.)
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No. of Recommendations: 34
Hi Saul.

I agree that recurring revenue -- especially as defined in the software space -- is an admirable attribute. However, it is not the be-all and end-all, or the only business model that can succeed. For example, neither (most) drug companies nor (most) food companies have recurring revenues in the sense that you use the term, but they have very stable revenues because the underlying demand for their product is relatively stable.

Currently, NVIDIA has a technological edge over its primary competitor, Advanced Micro Devices. That may not last forever, but NVDA has had an edge most of the time over the past fifteen years or so (no references - this is my opinion, but I think it is a widely-held one). I suspect that NVDA could crush AMD, but has not done so for fear of anti-trust enforcement. For example, look how quickly NVDA responded to Google's tensor-based processor threat. Intel has massive resources, but they've not really had success breaking into the GPU market.

NVDA's main market is enabling/enhancing the presentation of video games. I'm told that gaming is undergoing a resurgence with younger generations (I'm a cusp geezer, depending on your definition) due to the popularity of e-gaming. So its core market has a bit of a tailwind. I'm told that it is difficult to find GPUs in online stores at present due to gaming's popularity. The new Nintendo device, which contains NVDA chips, is popular. So, despite the lack of officially recurring revenues, I'm not very worried about NVDA's ability to convert inventory to cash.

Selling into the AI market is "gravy" at this point, but could become the "meat" down the road. I like the company's future prospects.

I am not going to argue that NVDA -- the stock -- represents good value at this point. I really haven't analyzed it with that in mind, and it is difficult to accurately model the growth rates of nascent markets. The current valuation -- even after Friday's decline -- looks stretched to me, but there's an element of price-anchoring at play there, I think.

Anyway, one thing I keep asking myself about chip companies is: Five or ten years from now, are there going to be more chips in the world, or fewer. I always answer, "More. A whole lot more." The real question is, whose chips? I like NVDA's chances of being among the winners.


Thanks and best wishes,
TMFDatabaseBob (long: GOOG/L, INTC, NVDA; NVDA is my largest individual stock position, but that is through long-term growth rather than through multiple purchases -- I've held since early 2004)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth
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No. of Recommendations: 1
On one hand having your product be commodities is bad, on the other hand it means your product is selling so much it is becoming a commodity. Smart phones are now a commodity but AAPL has done well over the years before developing any significant recurring revenue. I think NVDA is sufficiently diversified that they are not beholden to one customer and far enough ahead of the game that they will be the dominant player in multiple fields. Their founder/CEO has the vision to aggressively leverage existing technology into new fields (GPU into AI/Neural networks).

Maybe Tinker can better explain their API which will help create an ecosystem and maintain customers.

So in short I see NVDA as more like early 90s INTC.
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No. of Recommendations: 4
one thing I keep asking myself about chip companies is: Five or ten years from now, are there going to be more chips in the world, or fewer. I always answer, "More. A whole lot more." The real question is, whose chips? I like NVDA's chances of being among the winners.


I agree with that really, but could one have asked this thirty years ago in 1987:

one thing I keep asking myself about computer companies is: Five or ten years from now, are there going to be more computers in the world, or fewer. I always answer, "More. A whole lot more." The real question is, whose computers? I like IBM's chances of being among the winners.

;)

Saul
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No. of Recommendations: 5
I saw not only a company riding the wave of AI, but Big Data and server centers.

The current state of the art of AI is synonymous with Big Data and processing power. The processing power of NVDA chips might be taken advantage of by non-AI server processes as well. Not all AI processing will reside on servers, some applications, like self driving, cannot depend on, rely on, Internet latency and must be done at the edge, not at the core. NVDA has both edge and core chips.

NVDA has a terrific head-start. Whether it can retain it is to be determined. It's not so much the chip hardware which can be reverse engineered but the software architecture that drives it. The NVDA software is where I would focus my NVDA research.

Denny Schlesinger
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No. of Recommendations: 1
I think this is not about flattening or non recurrent revenue. This is about the next and what could it be.

they were in gaming and hit a growth spur in datacenters and now in self driving cars. They will participate the next spur with their AI accelerator. The hope is that 5 or 10 years down the road, you will see the flattening revenue just as small pause before that growth spur hit.

There are definitely risks and so many things could happen but I don't think the revenue is flattening when you look a bit forward.

tj
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No. of Recommendations: 3
Anyone that hasn't seen the presentation by CEO Jensen Huang is unaware of the power of this company. When he shows you an actual piece of hardware that replaces 400 servers and solicits orders from the audience with pricing and delivery commitments, you'll come away a believer. If you believe Tesla, you may be involved in snake oil, but here, the actual hardware and open software are there for you to see.
Which tech stocks have declined the most on Friday and today? The profitless ones or the profitable ones?
Art

Long, but worthwhile:
"http://www.ustream.tv/gpu-technology-conference?mkt_tok=eyJp...
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No. of Recommendations: 2
"I like IBM's chances of being among the winners."

Good one, Saul.

When they used to say, "No one ever got fired buying IBM", I think they were referring to IT people buying the mainframes, not portfolio managers buying the shares.

;-)

I hear you, but I think your argument would ring truer if you had chosen 35 years ago, 1982. By 1987, "Wintel" was already ascending.

Fool on!
Thanks and best wishes,
TMFDatabaseBob (I was given a few shares of IBM as a young child by a grandparent. They, along with a few shares of EK -- also gifted by a grandparent -- evolved into part of the down payment towards a 440 sqft studio apartment in Park Slope Brooklyn in the mid '80s. I haven't owned shares of either company since, but I'm eternally grateful for the first-hand education that my grandparents gave me into what long-term stock holding can achieve.)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth
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No. of Recommendations: 0
Yes that putting $5000 ( actual price unknown) chips into every car may be Tesla's biggest gamble . That means every car they sell costs thousands more than competitors unless AP is activated.

But they are also playing on the fact that very expensive to develop software costs nearly the same whether one copy or one million copies.

My guess , substantiated by polls, is that most gen 3 buyers will get AP.
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No. of Recommendations: 1
IBM decided they would rather have corporate control than sell PC. Because they had no idea that PC sales would grow so much. Or that price sensitive individuals would buy them, they were depending on the IBM name and corporate sales rather than on price cutting and manufacturing efficiency.

Compaq was much the same. I can still remember being in their store when the salesman (dressed in a natty suit) would not sell me a keyboard without upper level corporate approval. Which he never got, they were out for a long martini soaked lunch.
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No. of Recommendations: 0
Saul's neat analogy with IBM is also how Buffett discovered his original reservations about technology had been correct!

Tech. requires a different kind of investor; uncommitted, cynical, ready for rapid obsolescence and unexpected ambushes and inclined to ask ' you're asking me pay (italics) how many (close) years earnings for this?!'
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No. of Recommendations: 8
Hi Saul,
Bob gave a great response and I would like to add a little more. First look at how they are growing in the Data centers. Tripling revenue for the last 3 quarters. Pretty impressive. The Gaming side of the business will give them a great foundation for earnings, especially with Nintendo's Switch coming out and Nvdia's GPU is the center of that console. Nintendo supposedly can't keep up with the demand.

http://bgr.com/2017/05/01/nintendo-switch-sold-out-shipping/...

But what I am looking at is the future and what NVDA plans to do with their GPU cloud platform.

Perhaps the most vibrant environment is the $247 billion market for public cloud services. Alibaba, Amazon, Baidu, Facebook, Google, IBM, Microsoft and Tencent all use NVIDIA GPUs in their data centers.

To help innovators move seamlessly to cloud services such as these, at GTC we launched the NVIDIA GPU Cloud platform, which contains a registry of pre-configured and optimized stacks of every framework. Each layer of software and all of the combinations have been tuned, tested and packaged up into an NVDocker container. We will continuously enhance and maintain it. We fix every bug that comes up. It all just works.


https://blogs.nvidia.com/blog/2017/05/24/ai-revolution-eatin...

http://nvidianews.nvidia.com/news/nvidia-launches-gpu-cloud-...

You just have to look to the future and think where this company is going to be in 5 years. I think it will be huge.

Andy
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No. of Recommendations: 0
Selling into the AI market is "gravy" at this point, but could become the "meat" down the road.

My understanding is very limited but thought AI is where the company is positioning itself. Listen to their CEO intereview on FT. I posted the link on another thread.
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No. of Recommendations: 1
Hi Saul - I think most people have put their fingers on most of the points.

For me it was the very late realisation that Nvidia was not competing in commoditised ultra competitive markets like smart phones anymore but in high value and low competition segments: graphics/VR, crypto currency mining, servers and AI and that these weren't niches any more but mega profitable segments.

Whilst I like recurring revenue not every company can do this and not many tech companies. ARM didn't but had a great market position. Intel didn't but had a monopoly anyway in PCs and Servers.

The other point I like about Nvidia is that it seems a clean cut vendor. Companies hate Intel as they screw them over on price and monopoly standards. Companies hate Qualcomm because they practice some kind of extortion racket on royalties. I never hear complaints about Nvidia's practices or customer disapproval - maybe just treating customers well is a differentiator!

Lastly it seems they are really getting out ahead of the curve on VR and AI which will be enormous.

Don't get me wrong I hate the chip cycle and substitutability of chips - from IRF to Skyworks but I've also benefited from ARM and recognise that some companies can succeed in the right sweet spot - Intel in PCs is a case in point as well as ARM in mobile.

Ant
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No. of Recommendations: 3
I'd be curious how others who are invested in Nividia overcame these objections, or do you just feel that AI will be so big that the rest doesn't matter?

Multiple Possible Futures: Gaming Graphics, Autonoumous cars (not just AI in cars either), Data Centers (not just AI in data centers) and AI. These last three are probably a tsunami that will continue for a few years. As Andy mentioned, they have some big and growing customers for data centers and they are starting to farm out their own for AI research.

Gaming seems like the most boring, but I saw a video game championship on ESPN a few months ago. Really?!?! Colleges actually have comptetive gaming teams. Really?!?! That crazy stuff is getting big, and the better the graphics chip, the better the game. Will they get into AR and VR? Possible? Will they be used for the extremely high processing needed for cybercurrency? AMD is, why not NVDA.


Fundies

Current Earnings
EPS Due Date 08/09/2017
EPS Rating 98
EPS % Chg (Last Qtr) 126%
Last 3 Qtrs Avg EPS Growth 132%
# Qtrs of EPS Acceleration 0
EPS Est % Chg (Current Qtr) 68%
Estimate Revisions
Last Quarter % Earnings Surprise 19.7%

Annual Earnings
3 Yr EPS Growth Rate 44%
Consecutive Yrs of Annual EPS Growth 1
EPS Est % Chg for Current Year 20%
Sales, Margin, ROE
SMR Rating A
Sales % Chg (Last Qtr) 48%
3 Yr Sales Growth Rate 18%
Annual Pre-Tax Margin 27.6%
Annual ROE 32.6%
Debt/Equity Ratio 35%

% Change In Funds Owning Stock 3%
Qtrs Of Increasing Fund Ownership 8


Fundies seem pretty good to me, good growth and earnings surprises. not to say it should not correct, it should. It certianly seemed to be heading into a climax. It was growing far away from the 200dma, and that usually does not last long (looks like back when it started to correct from $120 range). Then after it jumped again Friday, the Citron call caused it to give back all its gains of the day and much more on huge volume. Not a sign of strong holders. All the newbies from the last week of buys were feeling pretty scared. Keep in mind, it was up almost 5x from its breakout last January. It has had a couple of pauses and a good one now is overdue.

That said, keep it on your watch list. I won't be afraid to add more if it has a nice 20% correction and shows it is bottoming out.
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No. of Recommendations: 6
Thanks Andy.

I agree with your additional points and would like to add two more that I forgot to mention. First, NVIDIA has developed a programming language called CUDA for developers trying to build AI applications on the NVIDIA platform. I've only heard positive things about CUDA in all the Seeking Alpha articles I've read about NVIDIA (and, BOY!, have there been a lot of them). Further, NVIDIA has been investing in training to increase the population of CUDA developers. So another intangible that benefits NVIDIA is support of the AI developer community. I think this ties in nicely with ant's points, which are quite solid, as usual.

Saul, the second point is that you might want to take your revenue and earnings analysis back a few more years. There is a certain seasonality to NVIDIA's results where you see a big jump in the October quarter, flattish results in January, a bit of a fall-off into April, July flat with April, and then another big jump in October. To look at four quarters' results and call them flattening is to ignore the company's seasonality. Over time, that seasonality may be weakening as the company becomes less reliant on gaming. But it is a reality of NVIDIA's business right now.

Kingran, I agree that NVIDIA is positioning itself towards AI. As much as I think they'll succeed with that, my wording was chosen to indicate that -- as of today -- that's not a done deal.


Thanks and best wishes,
TMFDatabaseBob (long: NVDA)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth
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No. of Recommendations: 1
"Don't get me wrong I hate the chip cycle and substitutability of chips - from IRF to Skyworks but I've also benefited from ARM and recognise that some companies can succeed in the right sweet spot - Intel in PCs is a case in point as well as ARM in mobile."

Even chip companies that later become commoditized if purchased early enough in the cycle can be very profitable. Remember when cell phones didn't have cameras? Omnivision (OVTI) was an early entrant in the camera chip sector. I rode that company from $5 to $25 before it became commoditized. I think GPU's used in gaming are in a growing but more mature sector, but I view AI and autonomous driving as green fields.

Rob
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No. of Recommendations: 5
I'd like to really thank all of you for your helpful responses about Nividia. You convinced me and I bought a little 0.5% starter position yesterday at about $148.

There's just one thing I'm puzzled and slightly concerned about. The thing I'm slightly concerned about is that I don't remember anyone expressing any negatives or worries about the company.

Thanks again,

Saul
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No. of Recommendations: 7
Yes, Saul. Welcome aboard, and I agree with your cautious approach.

"I don't remember anyone expressing any negatives or worries about the company."

To my mind, that is one of the big issues here. Everyone sees rosy prospects. The "battleground" issue surrounding this stock is valuation. Can one make money if one buys in at today's prices?

As mentioned previously, I bought in l-o-o-n-g before the recent run-up in prices. I'll give myself some credit for recognizing that parallelism (i.e., ability for the chip to work on many tasks simultaneously) had inherent advantages, but I didn't really recognize in advance how that would be exploited. Indeed, as I mentioned in a post on this board many months ago, I came close to selling my shares four or five years ago because (after almost a decade of holding) I still hadn't seen those advantages exploited. That decision not to sell, in hindsight, has been one of the top-five (or so) decisions affecting my net worth today.

I sure hope that anyone's decision -- especially yours, Saul -- to buy recently has similar ramifications. Sadly, though, there are no guarantees.

My NVIDIA shares are in a taxable account, so part of my inertia is tax-related. Additionally, NVDA has grown to be my largest holding. So the factors weighing on my decisions regarding this company probably don't mirror yours.

General market conditions have me contemplating raising some cash, and I'll admit that selling a small portion of my NVDA shares to reduce my concentration has crossed my mind. But I can't point to a company on my Watch List and say, "Clearly this one has better prospects", so I've been loath to make that move.

Please note: when spelling NVIDIA, that there are only two "I"s, not three. Regardless of what rules of logic and grammar might suggest.


Thanks and best wishes to all with their decisions regarding NVDA,
TMFDatabaseBob (long: NVDA)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth
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No. of Recommendations: 2

"I don't remember anyone expressing any negatives or worries about the company."


Isn't the big risk that someone develops a competitive mousetrap. Note that I didn't necessarily say better, but competitive may be enough to hurt the company's current dominant position. Can AMD catch up? Will one of the big dogs, for example, Google develop something new? Apparently, Google's TPU isn't a competitor currently.

Will Nvidia's captive hold over their audience remain?

Whether or not to buy the stock based on current valuation is another concern, of course. However, that is wholly different than business concerns. Right now there don't seem to be any true competitors, but how long will that last especially given the meteoric rise of Nvidia? There is bound to be a lot of money thrown at competing against them. Is their technological lead so far ahead as for that to not matter?

I would not profess to know the answers to the above and am sure there aren't firm answers as to the length of the competitive advantage. From following Tinker, I know he believes in the company's CAP; but I can't comment on that further.

Take care,
A.J.
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No. of Recommendations: 10
The thing I'm slightly concerned about is that I don't remember anyone expressing any negatives or worries about the company.

There are no barbarians at the gates just now, LOL

Looking at it from an evolutionary perspective, what happened at NVDA is "the adjacent possible." They purposefully developed chips with lots of processing power for graphics (GPU) for games. There was a parallel and unmet need for high processing power for things like bitcoin mining and AI. Instead of developing something entirely new, GPUs were adapted for this new use. By the time these news became public NVDA was well ahead of the pack and "path dependence" kicks in to keep them there.

Denny Schlesinger



The adjacent possible
https://www.google.com/search?client=safari&rls=en&q...

Path dependence
https://www.google.com/search?client=safari&rls=en&q...
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No. of Recommendations: 6
I'd be curious how others who are invested in Nividia overcame these objections, or do you just feel that AI will be so big that the rest doesn't matter?

1) I looked at the revenue growth by business segment and saw the several are growing rapidly and still relatively small compared to gaming. I think those that are growing fast have a lot of room to run.

2) I view NVDA as a call option on AI (e.g. machine learning). I think more and more companies may be
"forced" to adopt machine learning in order to compete. Companies that use it will out compete those that don't so everyone will need to use it. Since NVDA chips enable faster processing which is required for effective machine learning, demand for NVDA chips should rise.

3) As an add to #2, AI might significant;y change the way decisions get made by offloading more and more decision to computers. Could demand for computing really explode?

I have a 5% position in NVDA.

Chris
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No. of Recommendations: 81
There are plenty of negatives about the company, just none of them as Denny specifies "Barbarians at the Gate".

Unlike perception on this board, and by most, NVDA really has little to no real competition. Gasp! {goes the crowd}. The conventional wisdom comes out and says, "they are a chip company...a chip company...and they have no recurring revenue!" Yeah, whatever.

Don't believe me, look at NVDA's margins and ROIC. There are few companies in the entire world of this size that have similar margins. Wait...I know two...QCOM and INTC. And yes, it can be said that neither QCOM nor INTC have any real competition either. Gasp! {goes the crowd again} Intel has AMD, QCOM has Samsung and multiple others! Really? On the margins, that is about it. Neither Intel nor QCOM have any competitors that are threatening their market dominance, their ROIC, or their margins.

Similarly NVDA has no competitors. Like with INTC, NVDA has AMD. AMD is really the only competitor to INTC's x86 chip architecture that runs PCs, and AMD is the only competitor (of any volume) to NVDA's GPUs. Look at AMD's margins, 50% or less of the margins that INTC and NVDA have, and yet THEY ARE IN THE SAME BUSINESS! In fact, although it is hard to prove, AMD is said to have the finest chip designers in the world. Who cares.

You buy AMD if you don't want to pay the Intel tax. As soon as AMD comes out with a chip good enough to steal material marketshare from Intel, Intel drops its prices, picks up its R&D, and AMD cannot keep up with the product cycle, and simply cannot provide the whole product (that goes to more than just new hardware chips, but software, support, packaging, and all the other things that go into high volume "commodity" {not} chips). To make matters worse, INTC controls the x86 architecture, and each new generation changes things. You can run an emulator, next generation you need a new emulator to emulate what INTC is doing.

AMD tries the same with NVDA, particularly in the gaming market. Even here, AMD cannot keep up with NVDA. NVDA controls the high end, the place where real profits exist, and AMD cannot keep up with each new product cycle. To go further, eSport, as an example, is growing into the largest sports in the world. With more people playing eSports (and growing) than any other sport in the world, and by far I think. NVDA is a lead sponsor of eSports, and is as branded in eSports and gaming graphics as Intel is with "Intel inside".

It is so bad for AMD, that even good news is bad news. AMD's latest GPU chip for gaming is selling out, you cannot find it except on the "black" market. Why? It is the best chip for a specific sort of bit coin currency. Problem though. AMD and everyone else knows that this demand, for this use, is transitory (it will end when the mania for this particular currency ends, or an ASIC is developed (if it becomes a more long term demand source). But is AMD ramping up production to meet this demand? No. Why? AMD does not want to get stuck with the inventory. In the meantime, instead of these chips being used in gaming, there is no supply of these AMD chips to be used in gaming. Thus, even those who want to use an alternative to NVDA GPUs for gaming, they are turning to NVDA - growing NVDA's marketshare and brand. AMD cannot win by trying sometimes. And they have never been able to.

That is but one market for NVDA. NVDA dominates this market like INTC dominates the PC market. More than 70% of NVDA's current customers are using legacy GPUs that will inevitably be upgraded, particularly as AR, VR, and gaming grows. Even the gaming market has long-term growth for NVDA.

Other markets are AI and autonomous driving. There are several segments to these markets that I won't go into. suffice to say that Nvidia is the leading autonomous driving technology enabler in the world. No one disputes this. NVDA is in every Tesla out there, and Tesla, if it sticks to its plan, is 2 to 3 years ahead (at least) of any competitor. And TSLA has the most partnerships in the industry. NVDA's position on this (and it makes sense) is that once TSLA shows what is possible, that not only will their partners (the most and most important) stay with them and want to accelerate their programs, but that the entire industry will move towards NVDA and the single proven working autonomous solution in the world.

Sure you have INTC with Mobileye (paid $15 billion for MBLY), and is behind and desperate to catch up and already filing millions of dollars of commercials promoting AI and autonomous driving.

You have Waymo, owned by Google, and Morgan Stanley saying it will have a $70 billion market cap if it IPOs (despite no real customers, no real product, and current product $10s of thousands of dollars too expensive for any mass market). Dubious.

But if correct, what value to place on NVDA's autonomous driving platform alone?

AI. NVDA has a near monopoly on GPU chips used for training machines in the AI functionality. A little less, but roughly equivalent to INTC's 99% marketshare in server chips (where is AMD!). Part of what makes NVDA so powerful in training, actually a few things (1) ASICS and CPUs are not good at training machines. They cannot compete in this function, and no one else makes GPUs that can compete with NVDA in the data center. giving NVDA an incredible competitive position in the data center, (2) CUDA.

CUDA is basically the equivalent (a little different but close enough) of x86 to INTC. the AI programming universe has standardized on CUDA, just like the PC market has on x86. As such, you cannot just make an equivalent or slightly better per cost GPU chip, and hope to gain marketshare on NVDA. Just as you are either going to buy a Windows computer, or a Chromebook, or a Mac, your not going to buy a PC, based just on price, in an operating system that you don't want or use.

I am not alone with this, it is well known in the industry, in fact there are professional boards discussing this very issue of "how did we let a proprietary software system to become standard in our industry!" It is not like the industry wanted to standardize on CUDA. They just did.

There is an alternative to CUDA, it is an open source language. Guess who maintains it? NVDA. NVDA chips run CUDA, but NVDA maintains this alternative. This is what AMD chips run. And from the talk in the industry (again, from many sources, but also from professional sources) this open source language is just fine, it works great. However, it usually take a year or so to receive updates, and does not have the same power as CUDA, at least not easily.

Here is a random piece on CUDA from a Hewlett Packard researcher. This is just random. But read about his opinion of CUDA: http://www.nvidia.com/content/cuda/spotlights/gpu-accelerate...

Shocking! HP sells many a CUDA powered server with NVDA GPU chips in them.

I will stop there on the good. There is a heck of a lot more that could be said. As for negatives:

(1) although GPUs are unchallenged in training, GPUs are not unchallenged in executing AI once trained. Google, as an example has in-housed its own TPUs to run AI execution, and these ASIC chips, run their specific function better and faster than GPUs can. An ASIC, however, is designed for a very specific task, where as a GPU (like a CPU) can be used for general tasks and more flexibly programmed to do multiple tasks. NVDA is fighting to win this execution market of the AI. It is quite material. There is no guarantee that NVDA will win this market.

(2) autonomous vehicles. There is an open question as to how much $s NVDA gets get autonomous car. I don't know. It is either enormous, or meager. I hope people out there can help me. The autonomous driving industry is also inevitable but who knows how it will play out. If it plays out like Elon Musk thinks it will, NVDA will remain the leading vendor in the world.

Can Google compete (they are almost not competing in the same market). NVDA, with Musk, is out to create a car that can drive itself 10x, 100x better than a human can do (but not perfect), but alway better than humans can drive. Google is building a car that will never, ever, crash or make a mistake. Its equipment costs more than $70k per car at this point in time (yes, will come down with scale, but that is a long way to come down).

INTC is perhaps a stronger competitor with Mobileye. But Tesla dumped Mobileye (or vice versa - who cares, obviously Tesla did not need Mobileye), and second you are competing against INTC, which has sat on its x86 monopoly for decades, and has had to make more than $30 billion in acquisition of two companies, just to have product in the AI market. The standard line in the brokerage world is that turning INTC is like turning a huge sea going vessel. Take a long time, but once you get it turned around...not actually the recipe for a flexible and heated competitor, but we shall see.

(3) the edge. NVDA obviously has an advantage on the edge in automobiles. But what about in other products? NVDA is mostly ahead of everyone here as well, with product, and they continue to produce product, but mobile edge products are a very nascent thing. Some say that NVDA's dominance in the automobile will lead to competitive advantages in other edge products such as IoT (Internet of Things) or in drones, planes, boats, trucks (another place NVDA is a leader - not sure if THE leader), robots, who knows what.

Here, Apple is showing interest in competing. And we still do not know what Apple is doing in in autonomous vehicles (other than everything is currently vaporware, and as I was upset with again today, Siri still really is not that good).

So not really negatives, but challenges going forward, uncertainties going forward. NVDA has margins and ROIC that you see only from "monopolies", not from nefarious means, but due to the structure of the market. Whether it is path dependency, or product architectures that get standardized on, branding, scale, speed of product cycles, whatever, NVDA has it.

NVDA is still owned and run by its founder (6% holding still and not selling. This is his baby), and is one of the best managed businesses that I have ever seen, bar none.

Because of this, I am quite comfortable buying and holding NVDA. It is a fascinating company to follow, a fascinating industry to follow, so I will stay on top of things, but the company itself, is a rare company. It really has no real competition, anymore than AMD was for INTC. Unlike INTC however, where no one could imaginable upset their x86 monopoly once it was set, NVDA has similar advantages, but does not mean that better solutions cannot be found and gain material marketshare (but it won't be AMD).

I am not one of those who sees a few day of a down market and goes buy, buy, buy. Ridiculous. Stock markets move on longer cycles. Look at the 52 week highs and lows, a bit more than 5-10% differentiates the highs from the low, and these swings do not happen in a linear fashion. So I don't play that game, but from a business perspective, NVDA is a rare company. I have used the term Gorilla in the Geoffrey Moore sense largely because of CUDA. But as you can see NVDA has multiple competitive advantages, and multiple markets where it holds a 70% or greater marketshare.

Tinker
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"I don't remember anyone expressing any negatives or worries about the company."

The negative case is not too hard to imagine. The bulk of compute workload (AI included) are moving to a few large cloud providers who operate at the scale where they can run a hardware R&D program to design their own ASICs, which are intrinsically better suited for the workload than GPUs. Google has TPU (Tensor Processing Unit) and Apple is reportedly close to announcing Apple Neural Engine. In terms of other competition, Intel recently purchased Nervana which was also designing a custom ASIC. Even if GPUs are still used in the training phase, it's a smaller part of the AI/ML pie.

Even if that's not the case, they are selling into terrible markets (cloud providers that have lots of leverage over suppliers and automobile components).

On top of that, they are 10x next years estimated sales. Priced for perfection.

Final note: cryptocurrencies have no intrinsic need for mining at all. It exists to gamify network participation by introducing artificial difficult with a large reward in order to increase the number of network participants. If a large retailer or fintech company was to operate it's own private blockchain there's no reason they'd impose artificial constraints on block hashes (which is what requires the GPUs). Anyway, even looking at Bitcoin miners, they've all moved onto ASICs, too.
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"I don't remember anyone expressing any negatives or worries about the company."

Here's a few for you Saul...

1) Qualcomm comes along and boots Nvidia out of graphics and servers the way it booted them out of mobile
2) Graphics and Gaming becomes a saturated market and upgrade cycles lengthen
3) AMD out performs them in Graphics for Gaming and VR markets
4) Microsoft keeps the WINTEL duopoly going through X86 standards and re-asserts itself in servers
5) Cyclical chip industry tending towards commoditisation hits Nvidia
6) AI turns out to be a crock of old nonsense or even if AI does deliver chips aren't the answer (perhaps the solve is at the Big Data end rather than the peripheral end with the processor chips
7) ARM system licensees outperform off the shelf purveyors e.g. Apple A10 vs Qualcomm Snapdragon

Ant
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"I don't remember anyone expressing any negatives or worries about the company."

Here's a few for you Saul...


Ant, I sure hope the market never ceases to do its proper job of eliminating all needless profit. For any business you can always come up with multiple threats. The investor's task, a difficult one, is to separate the wheat from the chaff. How credible or likely are the ones you listed? Wasn't Intel going to eat ARM's lunch?

Would you repost your list of threats with an indication of the likelihood of any of them succeeding? Since one can take one's chips off the table at any time -- which is hard to do in real estate, for example -- the liquidity of the stock market removes the need to worry about distant threats. Saul is good at being nimble.

Denny Schlesinger
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I haven't read any of this thread, so apologies to start.

But I'll give you two things to think of off the bat:

1) Commoditization. There's no denying that NVDA is the biggest and most prolific player in the move to AI, but it won't be that way forever. It's so profitable that it's attracting competition, and with sales to OEMs, it's not about the *best* chip, but the *good enough* one.

2) Customer concentration: One customer accounted for 12% of all revs last year.

Very surface level, but thought I'd throw it out there.

Brian
No position
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The conventional wisdom comes out and says, "they are a chip company...a chip company...and they have no recurring revenue!"

Another way of looking at recurring revenue is, let us say there is $50B server market and say Intel owns 80% market share then Intel has $40B recurring revenue. Of course, that $40 could move up or move down a bit due to economic cycles, product launch, etc. But dismissing it as no recurring revenue and paying a higher multiple for recurring revenue (which I view as false security in SaaS model, where it is easy to move away) to software companies doesn't make much sense. On the other hand, if you are paying a higher multiple to software companies for their superior margin, lower cap-ex that is a different story.
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Wow! I can't believe all the help I've gotten from the board on this. Yesterday and today I increased my position up to 2.0% from 0.5% (probably won't go any higher).

thanks to you all.

Saul
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Unfortunately, there aren't a lot of great comparisons for NVDA. Not a lot of companies that do what it does, growing nearly as fast, nearly as profitable, etc.

Intel has been discussed. Intel's market cap is around 175B. NVDA's is just over half that, around 95B.

But Intel's revenue in the March quarter was almost 15B. Net income was 3B. ~20% net margin

Nvidia's revenue was 2B, and Net Income was 500M. ~25% net margin

So it's half the price of Intel but has 1/8 of the revenue and 1/6 of the profits. I think it's safe to say NVDA is expensive. The question, of course, is how big can it get? How much longer can it keep growing at 20%, 30%, 40%? How many chips are there going to be?

Those are difficult questions, but I see companies around the same PS ratio as NVDA (which is around 12 or 13) that are growing much faster and where the runway ahead seems much clearer. Their names are Talend, Shopify, Mulesoft, Hortonworks...you get the picture.

Bear
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I see companies around the same PS ratio as NVDA (which is around 12 or 13) that are growing much faster and where the runway ahead seems much clearer. Their names are Talend, Shopify, Mulesoft, Hortonworks...you get the picture.

Before someone corrects me, I realize SHOP's PS is higher...but it's growing faster. And Talend's and HDP's PS ratios are actually much lower than NVDA's.

Bear
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Bear,

I think when people are talking about Intel and NVIDIA, they are comparing where NVDA is now to where INTC was in early 90s, at the beginning of the PC boom rather than fundamentals of where both are currently.

Intel also comes up because it is a competitor. People can debate how much of a threat they are currently and potentially.

There is no doubt NVDA is expensive. Also that they have a positive future.

For me, I am happy with where they are in my portfolio but will be keeping a close eye for anything that comes up to give me pause. They are currently at 5%, mostly by growing, not by funds allocated. I would like to say I won't trim just based on valuation, but if they get really crazy ex[pensive, I will have to see.

Kevin
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Hit submit too soon.

With that being said, I agree there are other companies that look as good or better.
I added a little SHOP yesterday, increasing my position by about 20%.

Kevin
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So it's half the price of Intel but has 1/8 of the revenue and 1/6 of the profits. I think it's safe to say NVDA is expensive.

This is an oversimplified comparison. Intel is known for its "Fabulous Fabs" which in addition to being fabulous are fabulously expensive. If NVDA does not have chip fabs then the comparison you are making does not fit reality. A favorite comparison is between the Wintel Twins

http://softwaretimes.com/pics/intc-msft.png

People area lot cheaper than chip factories.

Who makes NVIdia chips? How are they manufactured?

Nvidia: TSMC Remains Our Primary Manufacturing Partner for 16nm FinFETs and 10nm


https://www.quora.com/Who-makes-NVIdia-chips-How-are-they-ma...

Denny Schlesinger
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I think when people are talking about Intel and NVIDIA, they are comparing where NVDA is now to where INTC was in early 90s

I know it was 25 years ago, but Intel's market cap was around $10B company or less. If NVDA's was 20B or 30B maybe it would be close to what Intel was then.

NVDA's is almost 100 billion. That's an order of magnitude different from Intel in the early 90's.

Just sayin',
Bear
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<<<I think when people are talking about Intel and NVIDIA, they are comparing where NVDA is now to where INTC was in early 90s, at the beginning of the PC boom rather than fundamentals of where both are currently.>>>

Intel is not growing. Its growth rate is in the single digits. That is why Intel paid $15 billion for Mobileye as an example, desperation, and also defense. INTC dominates the data center. 99% marketshare with its CPUs. The autonomous driving car is the new data canter, but on the edge. It is like a cellular phone or iPad but not just on steroids, but a troupe or a battalion of such devices on steroids. It is a mobile data center that is connected wherever it goes.

Things not even discussed on what does that mean, if you have data centers, everywhere, all the time, driving around, always connected. What will this mean for distributed computing of the future? What will this mean for information delivery (such as ads in car to locked in recipients). Many collateral things not even discussed in autonomous driving. Everyone is thinking linearly.

Keeping with linear thought, INTC fears that owning the edge with AI technology (as the autonomous vehicle is the ultimate such device) will also lead to advantages in providing technology to the data center. Thus, INTC not only wants the edge business, but it needs it to defend its future data center monopoly. Thus spending more for a company like Mobileye than you would even see in the age of the Internet bubble.

But these are other conversations. I just wanted to put valuations into the equation. If you adjust for multiple vs. growth rate (and I have not done that calculation yet), I would wager NVDA probably looks pretty good in comparison to INTC. INTC maintains the multiple it has with no growth because it has such an extreme lock on its CAP. Different factors, different ways to derive a multiple.

The market rewards growth, and the market rewards CAP, and the market rewards TAM. INTC only has CAP left, whereas once, long ago, it had all in spades.

Tinker
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I know it was 25 years ago, but Intel's market cap was around $10B company or less. If NVDA's was 20B or 30B maybe it would be close to what Intel was then.

$10B 25 years ago is probably equivalent to $30B today.
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I am not sure I have seen it mentioned but another area that creates demand of NVDA GPUs is for crypto-currency mining. It seems that CPUs matter less and most use high powered GPUs to make it effective. Otherwise, you probably spend more in electricity than you gain in value. Though, some of the crypto-currencies may also be disruptive to large data farms and other places that utilize GPUs.
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<<<I am not sure I have seen it mentioned but another area that creates demand of NVDA GPUs is for crypto-currency mining. It seems that CPUs matter less and most use high powered GPUs to make it effective. Otherwise, you probably spend more in electricity than you gain in value. Though, some of the crypto-currencies may also be disruptive to large data farms and other places that utilize GPUs.>>>

The battle between ASICS and GPUs can be seen in crypto-currencies. Once a crypto-currency becomes a longer term thing, that gives incentive for someone to invent an application specific ASIC for it that can displace the GPUs.

But for crypto-currencies, that don't have staying power, there is not enough lead time nor incentive to do so, and thus GPUs remain the only viable means of dealing with the currency.

It must be said though, that crypto-currencies keep changing, making it harder to produce an application specific ASIC for the particular currency, thus requiring GPUs.

In another win for GPUs over ASICs, an AI consulting firm raised more than $100 million in venture capital funding today. I won't go into the details, but very high pedigree this company. What they want to do is compete in AI against the big players like google and Microsoft and Amazon.

But it does not sound like this business will work with ASICS. This is because its primary offering is software delivery to provide AI solutions. And the hardware they use will need to be flexible (like a CPU), and not specific to one function (that an ASIC would provide). Thus this business will not turn to ASICs, but to GPUs for its infrastructure for not only machines learning (as discussed in my prior post on the subject) but also for execution of the AI learning.

Google, as an example has developed an ASIC, called a TPU, for its data centers. But these TPUs only work for specific functions. Google still uses GPUs throughout its data centers. NVDA's top of the line new product combines its own TPUs with its GPUs, so NVDA is not ignoring this.

However, where the need is more general, like what we want out of a CPU, instead for one specific task (or set of similar specific tasks) you are not going to replace GPUs with an ASIC.

How all this plays out will be seen. But it also an example to instruct on why an ASIC vs. a GPU, and that the complexity of this, I think, will lead to further advantage to NVDA, as long as GPUs are a material part of this AI infrastructure. Mixing and matching can be a nightmare (As we have seen with Intel in the data center - this is certainly the case. No one mixes and matches Intel chips with AMD chips, and very few enterprises do so with PCs either, even thought AMD PC CPUs are mainstream, although a minority of marketshare). There is a lot of complexity that goes into programming and running these things, and mixing vendors has not been the best practice in these industries in the past.

Tinker
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(probably won't go any higher)

Probably will, you just won't have to add to it.

Cheers
Qazulight
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chip fabs were Intel's not so secret weapon. Cost over $1 billion each and Intel had lots of trade secrets.
Nvidia will need to find and keep other edges. The cost was a benefit for Intel in the early days but lots of people know how to make them efficiently today and the mucho expensive and challenging of ever shrinking die sizes seems to be near an end.
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That's an order of magnitude different and for some stocks we seem to be in an order of magnitude bigger bull market than usual.
Come Mr Bear the market cap will melt like a popsicle in July.
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Intel is not growing. Its growth rate is in the single digits.

The low single digit growth is considered as no growth. Ugh. Sometimes when you are as dominant as Intel in its domain, you don't get credit for dominance but everyone is discounting the stock for possible future competition.

How many stocks that owns 99% market share in a huge market like datacenter segment, you can buy at 13.5 PE and yielding higher than 30-year Treasuries, that is growing at a faster clip than GDP, and growing its dividends?
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<<<How many stocks that owns 99% market share in a huge market like datacenter segment, you can buy at 13.5 PE and yielding higher than 30-year Treasuries, that is growing at a faster clip than GDP, and growing its dividends?>>>

Not many, but Intel's growth is going to further slow as PC sales slow, as competitors like QCOM start selling ARM based x86 chips (Intel has already said they are going to sue anyone who might try this - QCOM is no stranger to such suits), and INTC is on the record stating that the automobile is the new data center, and that the company that can dominate the automobile will have an advantage selling into the data center in the future.

the Intel x86 CPU is slowly ebbing away as the dominant non-commodity chip technology in the world. Wireless is ARM, AI is NVDA, it is a long-term trend.

Intel is battling to make this not so. Thus the long-term concern that has caused Intel to go on an AI buying spree, I believe something like $45 billion so far, $15 billion Mobileye, $15 billion for the FPGA chip company (Altera I believe).

The 99% share in the data center is safe, but it is everywhere else INTC is worried about. Most particularly INTC is worried about what happens when the data center moves to the edge when each car becomes a data center.

Will be fascinating to follow. But I think this is the reason that INTC may be demonstrating being undervalued, as there is long-term risk, not catastrophic, but to INTC's relative continuing financial might. But INTC is fighting back, as best it can. I just don't have a lot of confidence, after INTC utterly missed out on the largest trend in computing in history (even bigger than the PC), and that is mobile computing, that INTC can now do better in AI on the edge (most particularly autonomous automobiles).

That is my opinion on INTC, but the facts behind what INTC is looking to strategically going forward.

Tinker
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<<<just don't have a lot of confidence, after INTC utterly missed out on the largest trend in computing in history (even bigger than the PC), and that is mobile computing, that INTC can now do better in AI on the edge (most particularly autonomous automobiles).>>>

Imagine if INTC had bought out ARM instead of trying to unsuccessfully compete. I think this is why INTC has gone on such a mad AI acquisition spree. INTC does not intend to make that same mistake. I'm not sure not buying out ARM was Intel's mistake, but relying on its x86 monopoly. Something Microsoft did for far too long as well.

However, MSFT is now an innovative company again. So INTC may be able to become such again as well.

Tinker
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INTC is on the record stating that the automobile is the new data center

Just to be clear, the automobile is the datacenter for the vehicle. It is not the datacenter for the enterprise. I understand when a car is moving at 80miles an hour, it cannot communicate with cloud and the self-driving vehicle needs to have all the processing capabilities and the data required to make decision instantaneously should be within the vehicle, as even few milliseconds of lost connectivity could be fatal, hence the vehicle is the data center. There is a difference, and your quote is missing that nuance.

the Intel x86 CPU is slowly ebbing away as the dominant non-commodity chip technology in the world. Wireless is ARM, AI is NVDA, it is a long-term trend.

I thought, last year after unsuccessful for many years, Intel made a break-in in the wireless market. iPhone, the biggest wireless market, created two phone models one for Intel and one for ARM.

Currently, NVDA is the dominant player in AI, but it is too early to write off Intel from that market. Intel is doing lots of stuff in AI and we need to see where they are going with Mobileeye, they are not making $15B investment if they are not serious.

Most particularly INTC is worried about what happens when the data center moves to the edge when each car becomes a data center.

Cars are not data centers. Period. More data processing will move to edge, the very nature of IOT devices would require decisions to be made on the edge. That doesn't mean only one player can dominate that market.

I just don't have a lot of confidence, after INTC utterly missed out on the largest trend in computing in history
Look at Microsoft. How many trends did it miss out? Their dominant windows/ office franchise carried them through. And eventually Satya took over and the stock is phenomenal. I am sure Intel recognized their miss on mobile and the $15B mobileeye purchase is a reflection of that fact.

On the other hand, I dearly pray NVDA hits a miss on a Quarter. This is a good long-term story, I just need the right price to enter.
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http://www.zdnet.com/article/intels-mobileye-purchase-may-re...

Here is a quick article on it. There are better ones out there that differ with whether or not the car becomes its own data center. The amount of data coming off a car is estimated to be enough to be its own data center on wheels.

Again though, all these articles and projections are linear thinking. What happens when you have all this computing power on the edge, is it just going to be wasted? The battle for the edge is worth $100 billion or more, but I think it is only a part of what will be fought over. With cars being mobile data canters the world's total computing power, as if it had not grown enough, is going to experience a new level of growth again.

I would put out the share volume of data that Intel themselves has projected will come from each automated car, but I forget the number and I don't have time to dredge it up at the moment.

But yes, the plan is to have AI power on the edge, and then link it back to the data center. I think what is being missed here, is the numbers coming out of these cars in terms of processing power and data are the type of numbers that you see in a data center itself. Makes one wonder then, why would we remain so tethered to the data center then? Particularly since it creates lag, lag that can be nearly eliminated by distributed computing on the road. But what do I know.

What I do know is that Intel is fighting for its future by trying to get into cars.

And btw/ if you consider some small wins into the iPhone as Intel not losing out on the wireless market...oh boy. ARM is in every single cell phone in the world, wireless chip, etc. Intel market share in wireless? If it were 1% I'd be surprised.

Intel lost out big time in the mobile computing world. And it is now seeing the effect of this with declining PC sales and data center sales down into the single digits. Its mobile sales are not even a blip on its own books, much less in the market as a whole.

As for NVDA, it was "cheap" at some point I think, but I don't remember when, and it has still gone up 500%, with its share price rise largely tracking not momentum but its fundamentals. Maybe now is the time it is no longer worth investing in. I cannot say. The company is worth what someone is willing to pay for it.

Tinker
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There are better ones out there that differ with whether or not the car becomes its own data center. The amount of data coming off a car is estimated to be enough to be its own data center on wheels.

You are not missing the point. The car is a data center for its own purpose. In other words, all the data required for a car to be autonomous has to reside within the vehicle because the speed at which it is moving, it cannot connect to the cloud or central data center to make decisions. You are confusing this with cars becoming data center for "enterprises". They are two different things. BTW, this is going to be somewhat true for many IOT devices.

What happens when you have all this computing power on the edge, is it just going to be wasted?

Today my cell phone has more computing power than my first desktop. But what happened is, the edge data moved to cloud, yeah, CD's and VHS tapes that were in your home moved to cloud. The edge devices have different functions. Say for ex, you may have a fridge with some IOT capability but that doesn't mean it will store all the data or become a data center. It will still work with some central (cloud) system residing in a data center and simultaneously have some local data, processing to do few things.


Agreed Intel has missed mobile but so has NVDA. I don't think you are holding that against NVDA. I guess you have your views and I have mine. I think it is too early to dismiss that Intel will not be a player in AI. In any case, as an investor, you don't really have to bet only on one horse.
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<<<Agreed Intel has missed mobile but so has NVDA. I don't think you are holding that against NVDA. I guess you have your views and I have mine. I think it is too early to dismiss that Intel will not be a player in AI. In any case, as an investor, you don't really have to bet only on one horse.>>>

Agreed, and I have no issue against Intel. An amazing company. My only point is that Intel, like Microsoft, both missed the biggest change in computing despite being the biggest companies in the industry. The ultimate innovator's dilemma case. Perhaps IBM, but I think with IBM or even Xerox it was more management arrogance than anything else. And these changes happened right in front of their faces, and in fact they tried to be part of the mobile computing paradigm and both utterly flopped. Belly flopped.

But as I indicated in a prior post, Microsoft is again relevant and innovative, so no reason Intel cannot find its footing as well, just taking a bit longer.

With NVDA, I am not as aware of their history. But clearly, they are not a company that derives much revenue from mobilily applications. But I give NVDA a pass here since they are still in high growth markets, all of them. Even the GPU gaming market, although surprising to me, is estimated by NVDA to be by far their largest future addressable market, even in comparison to AI and autonomous driving. And that it will still have a long term growth rate, of 20%. Subject to NVDA being correct in their market assessments. Thus, I cannot hold it too much against NVDA for not being a large purveyor of mobile graphic chips. That is a lower margin market to begin with, and certainly not one NVDA plays very well in.

But not having a great presence in the mobile market has not hurt NVDA like it did INTC. It is as if NVDA just decided to bypass the lower margin mobile graphics market because it had better markets to focus on. And whether by luck, chance, or brilliance, NVDA certainly does. So that is why I don't hold the missing of mobile gains NVDA.

In the end I don't know what will happen. I bought NVDA because it seemed rather apparent to me , when I bought it, and even today, that 5 years from now NVDA is going to be worth much more than it is today. Why? Because of all the markets it is a clear leader in, as big as they are today, they are going to be much bigger, no doubt, in five years, and NVDA is going to be the #1 player or darn close, in each and every one of these markets.

The autonomous car market is the one with the most variability. NVDA, in a recent presentation only listed this market with a TAM of $2 billion. This did not make sense given the size of the market. But NVDA may have been defining the early market for autonomous driving. Or maybe we have overestimated it. TBD. I will take NVDA's word for it for now, but seems an awful lot of room to exceed this estimate.

INTC is just not in form, structure, or any attribute, that flexible or innovative of a company. It is a lot like iBM int hat way. Pocket protector, white button down shirt, a lot like a 1950s era corporation. It remains to be seen if INTC can hit upon a winning product for itself in AI outside of its CPU lock in data centers. INTC is great in thundering down a market with one or two mass products. Not so great in having to be on its toes, constantly innovating.

Intel knows this, that is why, for example, it has set up an entirely new business unit for Mobileye. It does not want to get in its own way in trying to penetrate the autonomous car market. IT is too important for the Intel culture to get in the way. So Intel understands its structural short comings, and is being "humble" in regard. Intel is also an utterly ruthless competitor, but it is difficult to see what leverage INTC has outside the data center. Intel has always used its x86 monopoly as leverage before. It really cannot do that in automobiles. Thus my both skepticism but also admiration for Intel understanding these shortcomings and doing what they can to overcome them as AI becomes the new computing paradigm.

But I like to go on about things chips. It is fun. AI is fun, even though it may be the death of us all.

Tinker
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What happens when you have all this computing power on the edge, is it just going to be wasted?

George Gilder said this in 1996:

GEORGE GILDER
12.01.96 - 12:00 PM
THE GILDER PARADIGM


Every economic era is based on a key abundance and a key scarcity.

[snip]

If bandwidth is free, you get a completely different computer architecture and information economy. Transcending all previous concepts of centralization and decentralization, one global machine will distribute processing to the optimal point and access everything. Feeding on low power and high bandwidth, the most common computer of the new era will be a digital cellular phone with an IP address.


https://www.wired.com/1996/12/gilder-3/

Trust me, that processing power won't be wasted but I don't have a clue how it's going to be used. Ask Gilder! What I do know is that processing has moved back and forth from core to edge several times.

For example, Bitcoin data is reproduced and distributed for security requiring both computing power and bandwidth. This is how evolution happens but what is rare is the person like Gilder who can predict the specifics.

Denny Schlesinger
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No. of Recommendations: 8
Hi Denny - sorry, been traveling in UK/Europe so late to replying to you on this..

Ok - I'm giving a Hi/Mid/Lo in terms of 1) Likelihood and 2) Impact of the threats mentioned from my POV. Please remember though - this isn't my industry.

1) Qualcomm comes along and boots Nvidia out of graphics and servers the way it booted them out of mobile
Likelihood: Low for Graphics and Mid for Servers | Impact: Hi for Graphics, Lo-Mid for Servers

2) Graphics and Gaming becomes a saturated market and upgrade cycles lengthen
Likelihood: Mid for Gaming, Lo for Graphics in general now with AR/VR/Display Tech etc | Impact: Hi

3) AMD out performs them in Graphics for Gaming and VR markets
Likelihood: Lo | Impact: Mid

4) Microsoft keeps the WINTEL duopoly going through X86 standards and re-asserts itself in servers
Likelihood: Mid | Impact: Lo

5) Cyclical chip industry tending towards commoditisation hits Nvidia
Likelihood: Mid | Impact: Hi

6) AI turns out to be a crock of old nonsense or even if AI does deliver chips aren't the answer (perhaps the solve is at the Big Data end rather than the peripheral end with the processor chips
Likelihood Lo-Mid | Impact: Mid-Hi

7) ARM system licensees outperform off the shelf purveyors e.g. Apple A10 vs Qualcomm Snapdragon
Likelihood: Lo-Mid | Impact: Lo


Ant
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No. of Recommendations: 1
Some miscellaneous, but on-topic, thoughts...

1) AMD got into the video card market by buying ATI in 2006. ATI was associated with their Radeon line of video cards, and they also made sound cards. Question: was ATI more competitive against Nvidia before it was acquired?

2) Nvidia's main chip supplier, TSMC, is Taiwan Semiconductor (ticker TSM).

3) Bitcoin (etc.) mining seems like a small niche market, though news about it has caused occasional spikes in the share price of NVDA and AMD.

4) AMD's R&D budget is quite small relative to its big competitors.

5) Using the various methods of fundamental analysis (cash flow, profit growth, etc.) what is the intrinsic value of NVDA? I think NVDA is a sound company, but I don't know a good buy-in price.

6) Because of its current price, I think that a disappointing quarter (as far as analysts are concerned) will cause a severe dip in the share price of NVDA.

7) I don't think NVDA's current high price is nearly as bad as the extreme pricing (and funny-money accounting) of companies like Cisco and AOL during the dot-com bubble.
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EdGrey, please could you tell me what the relationship is between Nvidia and Bitcoin? Thanks.
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1) AMD got into the video card market by buying ATI in 2006. ATI was associated with their Radeon line of video cards, and they also made sound cards. Question: was ATI more competitive against Nvidia before it was acquired?

From a consumer standpoint, ATI was fairly competitive with NVDA back around that time. They kind of went back and forth with being the best choice for gaming. More recently it seems that NVDA has pulled ahead in terms of performance and value.

EdGrey, please could you tell me what the relationship is between Nvidia and Bitcoin? Thanks.

One of the early alternative uses for GPUs (other than graphics processing) was number crunching, especially mining for Bitcoin (essentially doing complex computations). When not many people were mining Bitcoin, it was worth the cost of electricity to run a regular computer with a GPU to try to mine Bitcoin. These days it is generally not worth the cost, you need specific chips (application specific integrated circuits or ASICs) to do so profitably (or I suppose free energy).

Maybe some day self driving cars and all their multi core processing capability will mine Bitcoin while parked in a garage using the excess electricity generated through solar panels...
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EdGrey, please could you tell me what the relationship is between Nvidia and Bitcoin? Thanks.

GPUs tend to be better suited for mining Bitcoins than CPUs so miners will usually install multiple high-end GPUs in one computer
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Ok - I'm giving a Hi/Mid/Lo in terms of 1) Likelihood and 2) Impact of the threats mentioned from my POV. Please remember though - this isn't my industry.

1) Qualcomm comes along and boots Nvidia out of graphics and servers the way it booted them out of mobile
Likelihood: Low for Graphics and Mid for Servers | Impact: Hi for Graphics, Lo-Mid for Servers

2) Graphics and Gaming becomes a saturated market and upgrade cycles lengthen
Likelihood: Mid for Gaming, Lo for Graphics in general now with AR/VR/Display Tech etc | Impact: Hi

3) AMD out performs them in Graphics for Gaming and VR markets
Likelihood: Lo | Impact: Mid

4) Microsoft keeps the WINTEL duopoly going through X86 standards and re-asserts itself in servers
Likelihood: Mid | Impact: Lo

5) Cyclical chip industry tending towards commoditisation hits Nvidia
Likelihood: Mid | Impact: Hi

6) AI turns out to be a crock of old nonsense or even if AI does deliver chips aren't the answer (perhaps the solve is at the Big Data end rather than the peripheral end with the processor chips
Likelihood Lo-Mid | Impact: Mid-Hi

7) ARM system licensees outperform off the shelf purveyors e.g. Apple A10 vs Qualcomm Snapdragon
Likelihood: Lo-Mid | Impact: Lo


Ant



Thanks! The English language has one serious shortcoming for investors pointed out by economist Frank Knight, the ambiguity of the word "risk:"

But Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated. The term "risk," as loosely used in everyday speech and in economic discussion, really covers two things which, functionally at least, in their causal relations to the phenomena of economic organization, are categorically different. The nature of this confusion will be dealt with at length in chapter VII, but the essence of it may be stated in a few words at this point. The essential fact is that "risk" means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomenon depending on which of the two is really present and operating.

http://www.econlib.org/library/Knight/knRUP1.html#Pt.I,Ch.I

In my view the items you rate are of the "uncertain" kind which, by assigning them a grade (Hi/Mid/Lo), you try to convert to the "risk" kind but in realty they remain uncertainties. Someone who can navigate nimbly and successfully in these troubled waters can do extremely well. At one time I though I could but the Market gave me a very expensive lesson. Now I try to minimize uncertainty.

Denny Schlesinger
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