Sign up to Brilliant and you'll also get 20% off an annual premium subscription: https://brilliant.org/tldr/Last week, Nvidia revealed another massive increa...
Nvidia are the ones selling shovels in this gold rush, so it makes some sense that they’ll make a lot of money out of it even if it was fool’s gold all along.
Is Nvidias shovel-selling sustainable? Doubt it: when the gold rush is over, the demand for shovels will fall. However, we’re long past the era when most money being pumped into the stockmarket was actually controlled by investors who cared about prospects beyond the next quarter, and it does make sense that speculative investors would be seeking to profit from the rise on Nvidias profits due to their shove-selling for this gold rush, even if later it falls back again.
Which together with my point explains your own “But how do you go from NFTs, which never had widespread market support, to the market pumping a trillion dollars into Nvidia alone?” question.
Not only would LLMs and other more advanced generative AI have a significantly broader impact than NFTs if it lived up to the hype, but in technical terms it’s much more dependent on GPUs for its functionality with any decent speed than NFTs as you can see in this comparison I just found with DDG.
Mind you, if you meant Bitcoin rather that NFTs (since the last big demand for GPUs was for Bitcoin mining rather than NFTs) the point that the possible impact of generative AI is much broader still explains it, plus if I remember it correctly Nvidia stock did got pulled up by the whole Bitcoin mining demand for GPUs (I vaguelly remember something about their share price doubling within a few years, but am not sure anymore).
Also keep in mind that Stock Markets at their most speculative end - i.e. Tech - have a huge herding effect: everybody wants to jump into the “next big thing” hype train as soon as possible and keep wanting to do so as long as it seems to be going (i.e. as long as they think there’s a “Greater Fool” they can dump their overvalued stock on if an when it stops going) so there’s a huge snowballing effect that pushes stock prices and company valuations far beyond anything explainable by actual and likely future financial improvements of their situation: this is how we get Tesla reaching a market valuation which is more that the rest of the Auto-Industry put together even though the former sells far fewer vehicles than the latter.
Stock Market rational considerations, especially in the most speculative parts of it, are not on “how much wealth can this company produce” but on “for how much more money can I sell this stock later”, which is about one’s own “smarts” or advantages that others don’t have such as insider info and the gullibility of others, not about actual financial and accounting reasons of the company itself, which is why hype works so well to pump up the valuations of Tech companies.
Nvidia are the ones selling shovels in this gold rush, so it makes some sense that they’ll make a lot of money out of it even if it was fool’s gold all along.
Is Nvidias shovel-selling sustainable? Doubt it: when the gold rush is over, the demand for shovels will fall. However, we’re long past the era when most money being pumped into the stockmarket was actually controlled by investors who cared about prospects beyond the next quarter, and it does make sense that speculative investors would be seeking to profit from the rise on Nvidias profits due to their shove-selling for this gold rush, even if later it falls back again.
Sure, but NFTs did not generate this many shovels being sold.
Which together with my point explains your own “But how do you go from NFTs, which never had widespread market support, to the market pumping a trillion dollars into Nvidia alone?” question.
Not only would LLMs and other more advanced generative AI have a significantly broader impact than NFTs if it lived up to the hype, but in technical terms it’s much more dependent on GPUs for its functionality with any decent speed than NFTs as you can see in this comparison I just found with DDG.
Mind you, if you meant Bitcoin rather that NFTs (since the last big demand for GPUs was for Bitcoin mining rather than NFTs) the point that the possible impact of generative AI is much broader still explains it, plus if I remember it correctly Nvidia stock did got pulled up by the whole Bitcoin mining demand for GPUs (I vaguelly remember something about their share price doubling within a few years, but am not sure anymore).
Also keep in mind that Stock Markets at their most speculative end - i.e. Tech - have a huge herding effect: everybody wants to jump into the “next big thing” hype train as soon as possible and keep wanting to do so as long as it seems to be going (i.e. as long as they think there’s a “Greater Fool” they can dump their overvalued stock on if an when it stops going) so there’s a huge snowballing effect that pushes stock prices and company valuations far beyond anything explainable by actual and likely future financial improvements of their situation: this is how we get Tesla reaching a market valuation which is more that the rest of the Auto-Industry put together even though the former sells far fewer vehicles than the latter.
Stock Market rational considerations, especially in the most speculative parts of it, are not on “how much wealth can this company produce” but on “for how much more money can I sell this stock later”, which is about one’s own “smarts” or advantages that others don’t have such as insider info and the gullibility of others, not about actual financial and accounting reasons of the company itself, which is why hype works so well to pump up the valuations of Tech companies.