Comment on Peter Thiel dumps entire Nvidia stake, slashes Tesla holdings amid bubble fears
sugar_in_your_tea@sh.itjust.works 5 hours agoMy point is Nvidia isn’t propping up the bubble. If you look at the OpenAI deal, it’s a bit less than their yearly revenue, and the deal is for about the number of GPUs they make in a year, so it’s basically trading GPUs for equity. If anything, Nvidia is profiting from the bubble, not propping it up.
we will all be effected
Oh certainly, but I don’t think it’s any different from other large corrections.
Here’s how I see the major companies in that chart in a crash situation:
- Nvidia - currently trading at 50+ times earnings on AI hype, but 25 is more reasonable, so potential crash of 50%, but probably much less since they’re still king in non-AI compute
- Microsoft - AI is mostly value add, and the stock isn’t too inspired overhyped, so maybe 10% correction?
- OpenAI - would go under and get liquidated
- Oracle - datacenters and AI aren’t a huge part of its business, so probably minimal impact
- the rest - haven’t looked into all of them, but most will be hit hard
It’ll he hit hard, but not nearly as bad as 2000 or 2008. If I look at the S&P 500, only 3 of the top 10 (Nvidia, Google, Meta) would be severely impacted, the rest only seem to dabble. Those 10 make up almost 40% of the S&P 500 and like 30-35% of the total US market. There are more large companies in there as well, but I don’t think most will be screwed like OpenAI. Palantir, for example, likely retains its government contracts for their data alone.
So in an AI bubble scenario, I’m guessing we see a correction of like 20-30%, maybe less depending on the nature of it. I think a more likely scenario is a bear market where investors slowly get tired of poor earnings as the promises of AI fail to manifest. If OpenAI dies, large companies just move to another provider.
And final note, it’s not a bubble because someone made a graphic, they made a graphic describing how it could be a bubble.
I think they’re missing the forest for the trees here. It’s not a bubble because these companies are investing in AI, it’s a bubble because tons of companies are buying into the hype. These companies are merely investing into solutions those companies claim to want. I work for a relatively small non-US company (a few thousand employees, revenue around $1B), and the board recently came to our tech group asking what we’re doing with AI.
This isn’t a handful of companies propping it up, a large chunk of the market is afraid of being left behind and demanding AI tools. All the graphic shows is how large companies are investing to meet the demand. Microsoft used OpenAI products in its offerings, OpenAI is a major Nvidia customer, etc.
dogs0n@sh.itjust.works 4 hours ago
I can’t say I’m an expert in the theory of this stuff, so big chance I’m very wrong.
All i know is experts have already likened the current “AI Boom” to the dot com bubble.
Nvidia might not be propping up the bubble in certain ways, but they could be deemed the center of the bubble. They went from a $370B market cap 3 yrs ago (around ChatGPT launch) to now being around $4.5T (peaking very close to $5T near the start of this month I think).
They could be the king in non-ai compute, but 99% of their revenue comes from b2b sales (and has done for a very long time I believe) so I can’t see them keeping any of those gains if we see an AI burst (this entire gain in stock seems very related to AI, not to any other advancements made for their chips to my monkey brain).
Most big (and small) tech companies are really buying into this AI hype, not sure if using AI has caused gains in stock market prices for certain companies, but I imagine we could see some drops here too (im thinking along the lines of hey your business “relies of ai tooling now” so mby u cant compete im gonna sell).
So I think all these businesses getting on the AI train could be bad too.
And final note again, if we see a burst, I think everyone panic selling could spread over to people panic selling everything and trying to get their hands on cold hard cash so their entire life savings dont vanish in an instant, so market wide we could see big drops? Certainly this could be very bad. I’m not very sure though on all the theory, I don’t think i’m smart enough to theorise this type of stuff, but I tried anyways. Maybe the govt have learned its lesson (pressing doubt rn) and will do ANYTHING to stop a crash, idk.
sugar_in_your_tea@sh.itjust.works 2 hours ago
Yeah, that’s basically what happens in a major correction. In fact, stock prices are valid basically the result of how many prior people are buying vs selling; more buyers than sellers causes prices to go up, more sellers than buyers cause prices to go down. Stock prices tend to have momentum precisely because of this (people try to jump on the bandwagon on the way up and jump off on the way down). And that’s also why we tend to see a quick recovery afterward once all the facts come out.
A 20-30% drop is a pretty big deal. It’s not anomalous though. There have been 19 major corrections (over 20% loss) over the past 150 years, meaning it happens every 7-10 years on average (150/19 ~= 7.8 years).
I don’t think this is like the .com or financial markets of the 2000s. But let’s say it is. If I bought at the peak of the .com bubble (March 10, 2000), I would’ve gotten 5.3% annualized growth over that 25 years (so $1k would be $3900-ish), assuming I don’t sell. The impact would be limited long term.
The AI bubble popping wouldn’t be the catastrophy many are making it out to be. I think it’ll be closer to the 2020 correction.
I think Nvidia is overvalued. I don’t think the economy will crash if AI crashes.