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How can this be?
NVIDIA's revenue for fiscal year 2026 (ending January 25, 2026) was $215.94 billion
Nvidia revenue would be roughly 0.7% of US GDP if it were all in America. Nvidia margin is about 75%. So 25% of revenue goes to manufacturers in Korea or Taiwan. Maybe another 25% is foreign employees, operating expenses abroad. At least 50% of Nvidia should be derived as US economic activity. The chips are designed in the US after all. That's a cool 100 billion dollars or 0.3% of GDP, nothing to sneeze at.
Then there are all the other AI hardware companies like AVGO, the cloud providers like Azure or AWS, the AI companies themselves.
How could people possibly be building these gigantic datacentres and not have that picked up in GDP? https://youtube.com/watch?v=VLgDvjcvURc
If GDP is somehow not measuring the impact of AI investment then so much the worse for the GDP calculators I think. And it's not even clear that this is the case, EY seems to disagree:
https://www.ey.com/en_us/insights/ai/ai-powered-growth
I don't know if EY knows better than Goldman Sachs, I don't have a high opinion of either. However, I think that there are lots of people who want to hear that the bubble is popping and grasp for any sign that it is.
Imagine that it was the 1910s and tractors were the big new thing. Obviously tractors raise agricultural productivity. But maybe they're kind of unreliable, maintenance for this new technology is a bitch, maybe the methods for using them aren't well-established, maybe there's some difficult soil where the tractors get bogged down, maybe fuel distribution in the countryside isn't well-developed. There are lots of conservative farmers around. One could easily produce convincing anti-tractor arguments and examples. But in general, tractors would still remain the future of agriculture, profitable to produce and use. You could derive this from first principles, considering the power of engines and their utility vs horses. There was no tractor bubble, there is no AI bubble.
There actually was a tractor bubble in the US in the 1920s. From 1920 to 1921, the industry imploded and production dropped by more than half. The reason for this was twofold. The first was that speculators looked at sales numbers and treated tractors like they were consumables instead of durable goods. The second is that increased efficiencies through improved tractor designs reduced the demand for tractors.
Economic bubbles deflating don't necessarily kill technologies. Despite the tractor bubble popping, the technology stayed around and continued to develop at a reasonable pace. I think that's what's going to happen with AI. It'll be a useful technology, but today's players won't necessarily be tomorrow's winners.
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I'm not so knowledgeable for tractors specifically, but there definitely were car bubbles. When people realized that cars have reached a state close to horse-drawn carriages, will predictably become even better in the near future, and probably replace horses altogether, a host of new companies with various variants of car technology cropped up. Of course, as you should know, almost all modern cars have used the same basic style of engine, the internal combustion engine (and in fact, mostly a specific kind of it).
But it wasn't always so. There was a variety of companies with their own engine designs that overwhelmingly failed. And of course various companies experimented with non-engine related designs that also didn't work out. Some companies successfully made the switch early enough, but many just failed. You could do everything right, correctly predict the dominance of cars, invest in a reasonable company, and lose absolutely everything anyway.
The main difference now is that many of the current competitors are already giants so they can write off a lot of losses without going broke, and it's unclear whether governments will even allow them to outright fail. But a bubble popping on several of them (or even all of them - maybe the real breakthrough will come from a smaller competitor, though I consider it very unlikely) and them losing substantial valuation seems like a foregone conclusion, even if I think that eventually AI will be a technology of the future.
My understanding is that something similar happened for railways, even without the significant differences in engines (?). Revolutionary technology that generated multiple bubbles along the way that bankrupted many people.
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A technology can end up being dominant and important but still throw off bubbles in the meantime. Stuff like the early Dotcom bubble where everybody could see that the internet was going to be important, and yet funds were allocated to the wrong manifestations of that. Alternatively, some tech is hugely meaningful and yet a motherfucker to actually capitalize on as an individual private company.
But why is this even the right frame of looking at things? If it looks really powerful and useful, probably it is just really valuable. There might be reasons why it isn't but they should be specific.
What has tech been doing for the last 10 years besides AI? I can't think of any great improvement between 2012 and 2022. More irritating ads, having to subscribe to Microsoft Office, VR headsets with a handful of good games... Incremental advancements at best.
But now if I want to do something with a computer, I can get an AI to give me precise instructions or just do it outright. That's a genuine improvement. I don't have to wade through forums or oceans of SEO + ads with a search engine. I don't have to learn to code to make and sell code commercially - they seem to enjoy it and find it very helpful. I can just have it output niche, highly specific pieces of writing just for me, on a whim.
The technology sector has finally contributed something positive after about 10-20 years of resting on their laurels and now people are complaining about a bubble, it seems bizarre to me. This is putting aside all the scientific innovation and prospects of superintelligence.
Cisco had a P/E of 200 back in the day, Nvidia is in the 30s and is the largest company in the world. Where is the bubble? Is it just isolated to the AI pureplay companies like Anthropic or OpenAI who aren't profitable because of all the R&D they're doing?
I know it's cliched to say 'this time it's different' but if it looks different, then it probably is different? Maybe OpenAI has just gone down too many paths and finds that short-form video is not cost-effective since it caters to a population of poor people trying to game porn restrictions and upsets influencers/artists who love to hate AI video. Whereas selling coding AI actually makes lots of money, so they're redirecting compute for business use. In my experience it's far harder to make a profit selling AI to consumers than it is to businesses.
You're missing what a bubble is.
A technology can have profound long-term effects that are positive for everybody, yet still generate a bubble for investors who rush to try and take advantage of that effect and don't end up actually investing in the correct manifestation to make any money. The bubble is from the POV of those attempting to speculate on something, the actual relevant technology is immaterial
It's always a bit sad to watch all the artcels and redditors longing for "the bubble to be over". They're not talking about inflated stocks, but about the technology. As if the whole tech is just going to go away or go backwards and stop taking their jobs. They don't seem to understand that yes there is a speculative bubble and it may burst to some extent, but the tech is not the bubble and it will only grow bigger and better.
@RandomRanger I don't think the bubble is in NVDA so much as in the multitudes of small speculative startups that attract money based on them supposedly developing or using AI, or the push in all sorts of companies to be part of the trend.
But if those small companies go under, who cares? It won't have much economic effect, startups go under all the time. That's capitalism.
It's the hyperscalers who are too big and rich to go under and Nvidia that matter.
Suppose OpenAI collapses because of all their debt and spending. There'd just be a feeding frenzy as Microsoft just takes over their researchers, Anthropic and Google gain marketshare, maybe Chinese companies also make gains.
I guess that's what you're saying about the tech not going away but I don't see how anything would significantly change. People would just go to Gemini instead of 'Chat'. Kling or Seedance or Grok Imagine instead of Sora. What would the bubble popping actually mean?
It would mean a lot of shareholders losing a lot of money. Same as in the dotcom crash. That's who will care. The fact that it probably won't be your problem does not mean it does not/will not exist.
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They believe gen AI will be like NFTs, where the general consensus is that the technology was overhyped and has limited use cases and was mocked both at the time and in hindsight. They believe gen AI has few to no actual use cases and is essentially useless technology that wastes water, electricity, and compute to create text and imagery that is unreliable, useless, and has no function.
They’re wrong, but they’re very confident. In the case of gen AI images and video, they have enough numbers that they’ve been able to make gen AI art controversial and low-status, which in creative fields is a death sentence. They believe they can combine that power with generative AI becoming more expensive to use because of a burst bubble ending cheap generation for end-users to make it both low-status and expensive.
That said, I get the sense that uptake of AI generated artwork is slowly growing in the corporate space, particularly as an adjunct or aid to human design instead of a replacement.
A line found in the dictionary entry for redditor. :P
In the late 1940s, something like 96% of respondents in an American survey said they would never buy a TV. One generation later, everyone did.
While it is true that there is a lot of low quality slop and baseless hype/marketing of that slop, the potential for AI/agents to soon replace a lot of human labor should be obvious. Maybe that's the painful part that it is tempting or emotionally necessary to sweep under the rug.
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Indeed, we can see that when the dot com bubble burst, internet technology and adoption did not step back, it kept accelerating, probably it was even helped in the long term by capital becoming more careful and not just throwing millions and millions at every e-commerce under the sun.
But... Maybe those people are more hoping for the bubble to burst not because it will save them, but entirely because they believe it will hurt the "tech bros" they see as responsible for their current predicament.
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Motion tracking got much better, I think. That and the VR improvements might just be due to cheaper hardware related to phone tech? I’m not really sure.
Drones (consumer or otherwise…) advanced a lot in the same period. Everything from cheap commercial filming to light shows to endpoint package delivery. This is some combination of software + control hardware + insane battery developments, which are in turn related to the adoption of electric cars. Compare also the advances in prestige robotics, like BD’s Atlas and Spot.
Related, computer vision looks completely different than it did when I was in school. Even excluding AI!
Additive manufacturing has taken off. Prototyping, obviously, but also aviation and electronics fab. It’s become vastly more accessible to hobbyists, too.
Video calling exploded for obvious reasons. I think it had the opportunity to catch up with other advancements in streaming video. Speaking of which, social media accelerated a lot in the late 2010s. TikTok launched in 2016; all the American tech companies joined the party.
Oh right. Commercial spaceflight.
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