Nvidia’s Blowout Forecast Sparks $260B AI Rally • Hacker News Board

Re: Nvidia’s Blowout Forecast Sparks $260B AI Rally

#11

Post by huijzer » Thu, May 25, 2023, 4:54 PM UTC

SilverBirch wrote: post #8

I just can't get my head around this. Sure, Nvidia is in a good position with AI and Data Centre. I absolutely think they're in a great position and they're going to sell a lot of chips. But they're trading at 200 times earnings? I don't see how anyone could reasonably justify that. And not only that, but while yes, the earnings are good, surely the AI hype cycle has pulled forward a decent amount of demand, it's a r…

My guess is that retail investors buy without thinking about the price and institutional investors play along.

For some reason, retail investors look at the price when buying a car, but not at the price of a company when buying a stock. At the same time, institutional investors focus on the near-term due to misaligned incentives. As Warren Buffet put it in 1985, institutional investors can't wait for a good long-term deal or people will start shouting "swing you bum" [1]. So, the whole system is in some kind of crazy frenzy of pumping up the price until it burst. If it bursts, the institutional investors are the first to leave or obtained their fees.

Long story short: I think you understand it perfectly well. Buying Nvidia at a 200 PE ratio makes no sense from a valuation standpoint.

[1]: https://youtu.be/T6HHwOoq9M4

Re: Nvidia’s Blowout Forecast Sparks $260B AI Rally

#12

Post by dangwhy » Thu, May 25, 2023, 4:56 PM UTC

SilverBirch wrote: post #8

I just can't get my head around this. Sure, Nvidia is in a good position with AI and Data Centre. I absolutely think they're in a great position and they're going to sell a lot of chips. But they're trading at 200 times earnings? I don't see how anyone could reasonably justify that. And not only that, but while yes, the earnings are good, surely the AI hype cycle has pulled forward a decent amount of demand, it's a r…

would it be good idea to short the stock though?

Re: Nvidia’s Blowout Forecast Sparks $260B AI Rally

#13

Post by huijzer » Thu, May 25, 2023, 5:00 PM UTC

dangwhy wrote: post #12

SilverBirch wrote: post #8

I just can't get my head around this. Sure, Nvidia is in a good position with AI and Data Centre. I absolutely think they're in a great position and they're going to sell a lot of chips. But they're trading at 200 times earnings? I don't see how anyone could reasonably justify that. And not only that, but while yes, the earnings are good, surely the AI hype cycle has pulled forward a decent amount of demand, it's a r…

would it be good idea to short the stock though?

Probably not. When you short, your potential gains are limited to 100%, but your potential losses are unlimited.

"The market can stay irrational longer than you can stay solvent."

- A. Gary Shilling (https://quoteinvestigator.com/2011/08/09/remain-solvent/).

Re: Nvidia’s Blowout Forecast Sparks $260B AI Rally

#14

Post by [deleted] » Thu, May 25, 2023, 5:03 PM UTC

dangwhy wrote: post #12

SilverBirch wrote: post #8

I just can't get my head around this. Sure, Nvidia is in a good position with AI and Data Centre. I absolutely think they're in a great position and they're going to sell a lot of chips. But they're trading at 200 times earnings? I don't see how anyone could reasonably justify that. And not only that, but while yes, the earnings are good, surely the AI hype cycle has pulled forward a decent amount of demand, it's a r…

would it be good idea to short the stock though?

[deleted]

Re: Nvidia’s Blowout Forecast Sparks $260B AI Rally

#15

Post by meltyness » Thu, May 25, 2023, 5:42 PM UTC

huijzer wrote: post #11

SilverBirch wrote: post #8

I just can't get my head around this. Sure, Nvidia is in a good position with AI and Data Centre. I absolutely think they're in a great position and they're going to sell a lot of chips. But they're trading at 200 times earnings? I don't see how anyone could reasonably justify that. And not only that, but while yes, the earnings are good, surely the AI hype cycle has pulled forward a decent amount of demand, it's a r…

My guess is that retail investors buy without thinking about the price and institutional investors play along. For some reason, retail investors look at the price when buying a car, but not at the price of a company when buying a stock. At the same time, institutional investors focus on the near-term due to misaligned incentives. As Warren Buffet put it in 1985, institutional investors can't wait for a good long-term…

I don't think you can say that based on how many A100s you own. Perhaps with more A100s, you could confidently say what the PE should be, rather than simply claiming it's too high.

Re: Nvidia’s Blowout Forecast Sparks $260B AI Rally

#16

Post by scottiebarnes » Thu, May 25, 2023, 6:07 PM UTC

twoodfin wrote: post #9

sschueller wrote: post #6

GPU makers really lucked out in the last few years. First from the crypto craze and now the AI craze.

I dunno if it’s “luck”. Nvidia in particular made a big bet more than a decade ago on GPU’s having strong aptitude for important general computation problems. Turns out they were right.

Agreed, if you were playing with computer vision and deep learning ~7 years ago, you knew the potential. Nvidia maintained their stranglehold on the software and hardware platforms. OpenAI (and all the great open source research published by others) really blew it open for Nvidia.

Re: Nvidia’s Blowout Forecast Sparks $260B AI Rally

#17

Post by CHY872 » Thu, May 25, 2023, 6:15 PM UTC

huijzer wrote: post #13

dangwhy wrote: post #12

Earlier quoted context omitted.

would it be good idea to short the stock though?

Probably not. When you short, your potential gains are limited to 100%, but your potential losses are unlimited. "The market can stay irrational longer than you can stay solvent." - A. Gary Shilling ( https://quoteinvestigator.com/2011/08/09/remain-solvent/ ).

Naked shorting certainly leads to unlimited losses, but it’s not the only kind.

Simple example is that i can buy a put option in some company. If the stock price falls below that point, I buy shares and sell them to the option writer and make a profit. My maximum loss is limited to the amount I spent on the option.

Likewise the put seller has not taken unlimited risk - their risk is limited to the cost of the shares they’ve offered to buy at.

Re: Nvidia’s Blowout Forecast Sparks $260B AI Rally

#18

Post by huijzer » Thu, May 25, 2023, 6:26 PM UTC

CHY872 wrote: post #17

huijzer wrote: post #13

Earlier quoted context omitted.

Probably not. When you short, your potential gains are limited to 100%, but your potential losses are unlimited. "The market can stay irrational longer than you can stay solvent." - A. Gary Shilling ( https://quoteinvestigator.com/2011/08/09/remain-solvent/ ).

Naked shorting certainly leads to unlimited losses, but it’s not the only kind. Simple example is that i can buy a put option in some company. If the stock price falls below that point, I buy shares and sell them to the option writer and make a profit. My maximum loss is limited to the amount I spent on the option. Likewise the put seller has not taken unlimited risk - their risk is limited to the cost of the shares…

The most likely winner of such schemes are the brokers who sold two things instead of one. Buying great companies at fair prices is much easier and, in my opinion, safer. Another argument: how many short seller billionaires are there and how many long billionaires?

Re: Nvidia’s Blowout Forecast Sparks $260B AI Rally

#19

Post by paulddraper » Thu, May 25, 2023, 6:38 PM UTC

SilverBirch wrote: post #8

I just can't get my head around this. Sure, Nvidia is in a good position with AI and Data Centre. I absolutely think they're in a great position and they're going to sell a lot of chips. But they're trading at 200 times earnings? I don't see how anyone could reasonably justify that. And not only that, but while yes, the earnings are good, surely the AI hype cycle has pulled forward a decent amount of demand, it's a r…

It's a bubble for sure.

But as long as you're on the first half of the bubble, you're okay.

Re: Nvidia’s Blowout Forecast Sparks $260B AI Rally

#20

Post by welshwelsh » Thu, May 25, 2023, 6:51 PM UTC

sschueller wrote: post #6

GPU makers really lucked out in the last few years. First from the crypto craze and now the AI craze.

The second seems inevitable from the first. Crypto was when people discovered the massive computational power of GPUs, and AI is when people figured out how to direct this power to do useful work.