AI Reading for Thursday June 27
Suleyman talks about Microsoft's 'ferocious competition' with OpenAI alongside 'deep partnership' - YouTube
This is true! Nvidia is a great company. But the valuation is not a normal growth story, where the valuation is a couple of years ahead of current reality and the bet is, the growth runway is a lot longer than a couple of years.
Nvidia economics are more like a mining company which is the only source of a raw material that gains a new use, which creates a massive shortage. But markets turn massive shortages into massive gluts. At 100% gross margins, which would be very high for a semiconductor company by historical standards, Nvidia’s profits would fall by 2/3. And then to get to a normal growth company PE, their earnings have to double from here. So they have to grow shipments by 6x to justify their current stock price, which won’t happen this market cycle.
And hyperscalers will pressure margins by making their own silicon, long-run reality might be more like 50-75% margins which would be in line with peak AMD or Intel margins, and Nvidia’s historical margins. (calculating gross margins as (revenue-COGS)/revenue, which is not how Nvidia reports it)
It’s important technology that will underpin a lot of stuff, but just not the kind of moat a drug company has with a patented drug that is the standard of care, nor a tech ecosystem that underpins absolutely everything, like Apple, Microsoft, Google, Amazon. Maybe they have a shot at levering themselves into something like that, but it’s very premature for it to be the world’s most valuable company.
Google Translate adds 110 languages with gen-AI - The Verge
How Amazon uses gen-AI to understand and check invoices, detect anomalies. - WSJ
Softbank backs Perplexity at $3b valuation - Reuters
Paris Olympics to feature A.I. Al Michaels, inexplicably. - NY Times
Figma launches big redesign with new AI tools - The Verge
If you wondered what kind of text-to-video you could do on your 3090, here is the answer. - Backprop notebook
When I was a kid back in the 70s and 80s, a book or an LP was gold. What was scarce was content, and now what’s scarce is attention. Impossible for kids today to even imagine what that was like.
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