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Yea, but they would have to become insolvent in a way that makes compute lose value. The reason Nvidia is comfortable making these deals is because if OpenAI c

by spott 5d ago

Yea, but they would have to become insolvent in a way that makes compute lose value. The reason Nvidia is comfortable making these deals is because if OpenAI can’t use the compute, someone else can. Granted OpenAI going insolvent likely means a drop in the value of compute…

JumpCrisscross 5d ago
> they would have to become insolvent in a way that makes compute lose value They would have to go insolvent in a way that hits Nvidia revenue. Those are related by distinct factors, a difference that may matter in a crisis.
kennywinker 5d ago
Compute has already lost value for me. Six months ago I thought you needed a 1T+ model to be useful coding. Now I am able to get by just fine with a 27b model. I see two factors converging to cause a collapse of this house of cards: 1. People are realizing that what they need isn't more general intelligence, it's more specialization. A small but well tuned coding model, a small but well tuned customer service model, a small but well tuned document explorer. 2. Specialized hardware - TPUs and NPUs - especially coming out of china. The latest GLM model was trained and runs on Huawei hardware. Nvidia is only worth so much because they are the biggest and best provider of the kind of compute needed to run llms, but the export bans mean china has a lot of incentive to topple that monopoly. The amount of compute we need to do the things llms do is falling rapidly, the number of people who can provide that compute is rising.
- pvab3 4d ago
  I've been thinking about that and that's why Nvidia's prices are surprising to me. Investors should know that better than me so there must be something I don't know
  - detourdog 4d ago
    It’s really hard to know when the large tech companies have so many shares owned by a single figure. They can use margin loans and options to create the appearance of demand.
  - torginus 4d ago
    Money is not real. Just like how I could borrow $100 from you, and you could borrow $100 from me, and we'd be $200 in debt in total, I could buy 10% of shares in your company for $1m and you could buy 10% shares in mine, we'd have 2 companies worth $20m together in total.
- SleightOfHand 4d ago
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  - kennywinker 4d ago
    OpenAI dropped sora because it was costing them ridiculous amounts of money and earning them very little. They determined that the market can't support the cost of generating video. Without a material change in the market (more buyers, vastly cheaper generation), it's unlikely a different company could make that work. More buyers isn't likely to happen, so that leaves vastly cheaper generation - something that would cause nvidia's value to collapse if it happened.
    - fc417fc802 4d ago
      > the market can't support the cost of generating video. I'd suggest that's only the case given the current quality of output. Media is incredibly expensive to produce. A model capable of sufficiently high quality could charge prices that are absurd by today's standards.
      - gbear605 4d ago
        It’s a very small set of buyers that are in that price range. Total annual domestic box office revenue is like $10 billion, maybe $50 billion for global TV and film. And that’s revenue, not profit, and a lot of costs are going to marketing, not to filming and casting. That’s a lot of money, but it’s not the scale that OpenAI and Anthropic are at. Video generation would only make sense at that scale if it was targeting individual consumers, but then it’d need to cost something that consumers are willing to pay - which practically is probably a few hundred per year at most among US consumers, and much less globally, so again it doesn’t solve for the size of the AI companies. I don’t see a way that video generation becomes a big industry without making generation much much cheaper.
        fc417fc802 4d ago
        Aren't these two largely separate questions? Viability versus if a given incumbent has interest in a market of a given size. With the combination of (at minimum) streaming platforms, the box office, and advertisements video and audio generation would be viable at a remarkably high price point (as compared to the current token prices for other sorts of things). And as the price comes down presumably the market would grow larger - by how much I have no idea but there are certainly a great deal of currently underserved niche markets.
- zer00eyz 4d ago
  If you reshuffle your argument, and apply the same facts you get to a similar conclusion but with a drastically different spin. > it's more specialization China, constrained by hardware, and talent (not to slight the Chinese, but they are limited to domestic resources - and much of the US effort is very international). They did, what the Chinese do, and optimized the process of production, and drastically lowered the cost of development of their models. Cheeper to build, cheaper to run is just good economics. Meanwhile in the us, we have open AI doing "experiments" - it looks like the costs around the hugging face hack are going to be about the same as China would spend on building out one of their smaller efforts (several million dollars). (Depending on whos numbers you trust, the fact that I can even make this claim should make you raise an eyebrow). Go back to the 80s' and "expert systems" - most people will tell you that for their time, they were amazing, and useful. People would have loved to have more of them but they were so cost prohibitive that we all but abandoned them for serious use. The US frontier labs seem to have forgotten this lesson and their calls to "slow down" look like an excuse to "cut the waste so we can move to making money".
- sellmesoap 4d ago
  I think what will keep the industry afloat, all else failing, is the surveillance industry! Nothing like a fat reoccurring cheque from the government to check if little Jimmy is committing thought crime!
- pilooch 4d ago
  That's unless the code produced in the future is much more complex than today's.
  - zahlman 4d ago
    Sure, but it would be actively bad to make the code more complex simply because we have machinery that helps us deal with the complexity. A big part of how people assess the models' coding capability is whether they create needless, incidental complexity.
    - vasco 4d ago
      That's like saying it'd be actively bad to make the code more resource intensive simply because we have machinery that helps us deal with the extra requirements. And as we know as computers got more powerful code didn't get lighter. If it can, it will.
      - detourdog 4d ago
        Using more resources than necessary is actually waste.
        vasco 4d ago
        That's my point
        zahlman 3d ago
        I'm confused. You started out with "That's like saying", but you appear to agree with me completely.
  - kennywinker 4d ago
    Assuming it’s all going to be vibe coded garbage, yeah it will be much more complex. Like a toddler writing a symphony.
- larodi 4d ago
  They need the right harness and either your help it auto produces in time enough content to further improve.
  - kennywinker 4d ago
    A classic big ai talking point. Color me skeptical.
- vunderba 4d ago
  > People are realizing that what they need isn't more general intelligence, it's more specialization. A small but well tuned coding model... It’s not quite as simple as that. Several studies have shown the opposite: models trained on more diverse knowledge tend to cross-pollinate across domains. So a more generalized model can actually perform better than a specialized one. That’s why you’re not seeing tons of tiny models (one for Python, one for Pascal, one for Rust, etc).
  - lelanthran 4d ago
    Problem is conflict of interest: the studies are mostly from the providers of the biggest models, or someone who received free tokens to do the research.
    - phoghed 4d ago
      It would be nice to hear exactly how the conflict of interest has impacted the specific studies and how they are wrong rather than conspiracy theory level speculation and hand waving at the entire category
      - butterNaN 4d ago
        I think is more than reasonable to be suspicious of studies funded by party with conflict of interest. Think of how many studies about climate change were funded by big polluters, for example. In 2026, the default outlook should be suspicion for any big private organisations with profit motive.
        phoghed 4d ago
        I think it’s less than reasonable to operate mainly on vibes, rumors, and hearsay. You don’t need to think about climate change studies. Instead you can read the allegedly tainted studies we’re actually talking about and profess to all of us what is wrong with them. You can’t point to exactly where they’ve fudged them.
- e_y_ 4d ago
  LLMs needing less compute would actually be a good thing for Nvidia due to Jevons paradox. Right now token costs are an impediment to using AI more broadly, and more efficient models would help adoption in cases where AI has proven to be useful, like coding. https://en.wikipedia.org/wiki/Jevons_paradox https://en.wikipedia.org/wiki/Jevons_paradox
  - kennywinker 4d ago
    Perhaps. But their huge valuation is based on them supplying the massive buildout of data centers that’s happening / planned. If that dies because a lot of people’s needs turn out to be met by a system at home they can run a 30b-150b model on, a lot more of that money goes to apple or intel or amd.
  - janalsncm 4d ago
    Jevon’s paradox is a common talking point but it is not a law of nature. LED lightbulbs use 80% less energy than incandescent but you don’t see people using 5x more lights on their homes. The overall energy used to light homes has decreased. And even if compute demand were perfectly elastic it’s only a good thing insofar as it drives demand for new Nvidia hardware. If tokens can be served from Apple hardware or Google hardware or Huawei hardware that doesn’t help Nvidia.
    - kennywinker 4d ago
      > LED lightbulbs use 80% less energy than incandescent but you don’t see people using 5x more lights on their homes. I mean… some homes definitely do. You must have seen those houses that are all lit up front the outside by lawn mounted spotlights.
    - tonyarkles 4d ago
      As I look up and see three lightbulbs side-by-side over my desk and another one in the lamp on the desk… which is dramatically more light than the old 100W bulb used but also lower energy consumption.
      - 4d ago
- keeda 4d ago
  This is the right kind of analysis, but we can look broader. Both the demand and supply situations are a lot more extreme and dynamic than appears at first glance. E.g. to your points: 1. Yes, smaller models will become more popular, especially as the tokenmaxxing trend dies down and people start stretching their budgets farther. That is a downward pressure on demand. But along the same dimension, consider that currently only about 40 - 60% of the world uses AI for only about 5 - 15% of their work hours. That means there is still 2x growth from users and 7x - 20x growth from the rest of the work hours left to capture! That is 14x - 40x more demand. Then consider that agentic tasks require multiples more tokens, and that is the kind of usage that is most likely to be deployed, and also the kind of usage that is the least used right now. That's another huge multiple to be tacked on. And the entire AI industry has been lamenting the extreme compute crunch they're facing (and also why Claude has 9's comparable to GitHub; whereas OpenAI has been chugging along because Altman was OK being called a "podcasting bro" while desperately scrounging for compute years in advance.) Nvidia's meteoric rise is entirely due to this kind of exploding demand with extremely limited supply. 2. Competing hardware is definitely a threat, but it has its own hurdles. Because the real bottleneck is not Nvidia, it's TSMC. Pretty much all demand for all chips in all devices in all the world flow to, like, 3 companies in the world that actually fabricate them, and TSMC is the biggest. And the supply is extremely tight, as the exploding costs of electronics clearly shows. So now TSMC will of course try to keep all its customers happy, but it will inevitably be forced to choose which ones it will keep happiest. And those will be the customers who can pay it the most. And that would be the one with all the money from its de facto status as a monopoly (and possibly even a monopsony)... Which would be Nvidia ;-) So yes, compute per task is falling rapidly... but it's barely a dent in the humongous total addressable demand, and the amount of hardware to support that compute is still very constrained, and most of that supply will likely flow through Nvidia.
  - kennywinker 4d ago
    > But along the same dimension, consider that currently only about 40 - 60% of the world uses AI for only about 5 - 15% of their work hours. Ah yes, i am constantly lamenting that my barista isn’t using ai enough ;) Hopefully you’ve adjusted your ceiling numbers to account for the large amount of people who can’t afford to pay for llms, and will never be able to pay, and aren’t worth it to advertise to since they can afford very little
SleightOfHand 4d ago
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- spunker540 4d ago
  Do you use coding agents? Just curious bc from my experience using coding agents, open ai’s codex is neck and neck with anthropic’s claude code if not ahead. I wouldn’t agree that OpenAI hasn’t done anything since ChatGPT since codex is my daily driver for software engineering
  - ravenstine 4d ago
    It's kinda nuts to me how people can act like Claude is lightyears ahead of OpenAI models. Sure, it's one thing to simply have a preference or claim that Claude does some things better, but in reality they are both about as effective at doing the same job. I've long preferred GPT models because they know better how to shut up and don't seem to overthink as much as Claude, but I'm under no illusions that if OpenAI went belly-up then I couldn't do my job essentially the same with Claude. GPT models have also clearly improved over time in terms of programming. There haven't been any "big bangs" necessarily, but it's really not hard to give the same task to 5.3 and 6 and see which one has better output.
    - lelanthran 4d ago
      All the models converged, in every single generation since 2022.
    - applicative 4d ago
      Nothing in the world is comparable to Fable. You presumably have a narrow specialized use case like programming.
- Kiro 4d ago
  I've paid more money to OpenAI than I've spent on all other products I pay for combined the past 5 years.
- 4d ago
jqpabc123 4d ago
Granted OpenAI going insolvent All the "frontier" AI companies *are* currently insolvent. They have never been anything other than cash burning machines. The only way they keep the lights on and the doors open is by borrowing money --- and epic amounts of it. If those operating the cash spigot decide to turn it off, all AI companies will likely be similarly affected --- and so will Nvidia. OpenAI expects to burn through more cash between 2024 and 2029 than Uber, Tesla, Amazon and Spotify did - combined - before those companies started making money https://www.morningstar.com/news/marketwatch/20251205243/this-crazy-chart-shows-just-how-much-cash-openai-is-burning-as-it-chases-ai-profits https://www.morningstar.com/news/marketwatch/20251205243/thi...
- oblio 4d ago
  To make things worse, hardware prices have spiked, due to AI companies. Fairly sure data center construction costs are also going up (they require so many resources that everything is constrained at the moment, especially electricity production). So I don't understand in what world these frontier AI companies can somehow become profitable. The basic tech they're using is basically the same. Yes, around the edges there are a lot of things that can be done, and were done, like caching, batching, mixture of experts, etc, but basically everyone has done all of that by now, and they're still losing money. So: Total costs going up a lot - revenues per unit not increasing proportionally, if anything, Chinese models are forcing those down. How does that math work out to profits? I don't see it. Or about as bad, after trillions of dollars in investments over multiple years, let's say the entire frontier AI sector has a total profit of $20bn by 2030. In what world does that make sense? Assuming they can scale that total profit to $100bn in 2035 without investing another cent from 2027 to 2035 (utterly ridiculous), the return on investment would happen in roughly 20 years.
  - jqpabc123 4d ago
    It's capitalism run amuck --- and on an epic scale. China is the one that is really in the driver's seat here. They have the opportunity and the ability to nullify/wipe out our huge investment in AI.
ak_111 4d ago
Devil's advocate: OpenAI not being able to use compute is highly correlated to many other AI companies not being able to find a meaningful use of this compute. Failure to take into consideration those kind of correlations ("If my biggest client isn't able to buy it, I would be able to find someone else who will") is one of the principle causes why many risk models turned out to be garbage during the Great Financial Crisis.
- spott 4d ago
  That is why I added the last line. But I also doubt Nvidia is on the hook if OpenAI just no longer wants the compute. I bet they are only on the hook if OpenAI cannot pay for it (is insolvent in some way). I also have to bring up that OpenAI has already spat out an inference chip that beats Nvidia on flops per watt. So they could potentially not need the compute while other ai companies do.
InsideOutSanta 4d ago
> if OpenAI can’t use the compute, someone else can. The problem with that is that OpenAI can only afford to pay for the compute because they are burning investor money (and so are most of OpenAI's biggest clients). They are losing billions. If they stop burning money, nobody else will be there to pay for that compute at OpenAI's cost. Sure, somebody will probably be able to use these GPUs, they just won't be able to pay nearly as much for them as OpenAI does. In reality, it's just nowhere near worth as much as OpenAI pays for it. Inflating the cost of compute is part of the problem caused by the circular financing, and if (or maybe when) OpenAI goes, the price of compute will go with them.
- andsoitis 4d ago
  > investor money But that’s the point. Investors believe investment in AI will pay off.
  - InsideOutSanta 4d ago
    Right, "believe".
    - andsoitis 4d ago
      That's how all investment works. That's how money works. You believe some story. Not everyone believes the same story.
      - InsideOutSanta 4d ago
        Believing only makes things true for so long until things fall apart. You can't keep burning billions every quarter. At some point, you run out of investors who believe, and the ones you have run out of money (see: Softbank).
        andsoitis 4d ago
        Yes of course. Is the point you're actually trying to make that investors are making a pure call, so their belief in the story is misplaced? That they should believe a different story?
CoolestBeans 4d ago
The problem is that if OpenAI doesn't want the compute nobody does. All of these companies' demand for compute are correlated. It isn't likely that OpenAI will want less compute in isolation. Furthermore, the circular financing structure means that if OpenAI buys less chips it means that Nvidia has less money to give to say Anthropic to buy more chips and suddenly the exponential growth that circular financing has allowed to grow runs in reverse.
59percentmore 4d ago
This is the fun part: the AI bubble bursts and the price of components keeps rising. Why? Because companies can just sell you a glorified thin client and force your average user to buy their compute, all subscription-like, from data centers.
0xbadcafebee 4d ago
> if OpenAI can’t use the compute, someone else can How? The hardware is in OpenAI's datacenters. Does Nvidia have a couple hundred semi trucks, contractors, and IT technicians, to repo the hardware and resell it to someone else before it's lost most of its value? These chips will be replaced approx every 3-4 years. So if OpenAI tanks, after Nvidia pays for and waits for the process to collect the hardware, they then have to sell it for pennies on the dollar. They lose almost all the investment. Also consider that SpaceXAI already had datacenters full of gear that they basically weren't using because nobody wanted their product, so they now rent it to Anthropic. The demand for hardware isn't really there at the scale of OpenAI.
- tiznow 4d ago
  >Does Nvidia have a couple hundred semi trucks, contractors, and IT technicians, to repo the hardware and resell it to someone else before it's lost most of its value? Via logistics contracts, yes.
BobbyTables2 4d ago
If AI wasn’t a thing would Nvidia be worth 1/10th is current value? Gaming is lucrative but not THAT lucrative…
rgmerk 4d ago
Maybe I’m just old and cynical but that sounds like the kind of assumption of independence of events that led to the GFC .
wsatb 4d ago
> The reason Nvidia is comfortable making these deals is because if OpenAI can’t use the compute, someone else can. They have no idea how much compute will be needed. They are estimating and trying to push it but they do not know the future.

by spott 5d ago

JumpCrisscross 5d ago

> they would have to become insolvent in a way that makes compute lose value They would have to go insolvent in a way that hits Nvidia revenue. Those are related by distinct factors, a difference that may matter in a crisis.

kennywinker 5d ago

Compute has already lost value for me. Six months ago I thought you needed a 1T+ model to be useful coding. Now I am able to get by just fine with a 27b model. I see two factors converging to cause a collapse of this house of cards: 1. People are realizing that what they need isn't more general intelligence, it's more specialization. A small but well tuned coding model, a small but well tuned customer service model, a small but well tuned document explorer. 2. Specialized hardware - TPUs and NPUs - especially coming out of china. The latest GLM model was trained and runs on Huawei hardware. Nvidia is only worth so much because they are the biggest and best provider of the kind of compute needed to run llms, but the export bans mean china has a lot of incentive to topple that monopoly. The amount of compute we need to do the things llms do is falling rapidly, the number of people who can provide that compute is rising.

pvab3 4d ago
I've been thinking about that and that's why Nvidia's prices are surprising to me. Investors should know that better than me so there must be something I don't know
- detourdog 4d ago
  It’s really hard to know when the large tech companies have so many shares owned by a single figure. They can use margin loans and options to create the appearance of demand.
- torginus 4d ago
  Money is not real. Just like how I could borrow $100 from you, and you could borrow $100 from me, and we'd be $200 in debt in total, I could buy 10% of shares in your company for $1m and you could buy 10% shares in mine, we'd have 2 companies worth $20m together in total.
SleightOfHand 4d ago
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- kennywinker 4d ago
  OpenAI dropped sora because it was costing them ridiculous amounts of money and earning them very little. They determined that the market can't support the cost of generating video. Without a material change in the market (more buyers, vastly cheaper generation), it's unlikely a different company could make that work. More buyers isn't likely to happen, so that leaves vastly cheaper generation - something that would cause nvidia's value to collapse if it happened.
  - fc417fc802 4d ago
    > the market can't support the cost of generating video. I'd suggest that's only the case given the current quality of output. Media is incredibly expensive to produce. A model capable of sufficiently high quality could charge prices that are absurd by today's standards.
    - gbear605 4d ago
      It’s a very small set of buyers that are in that price range. Total annual domestic box office revenue is like $10 billion, maybe $50 billion for global TV and film. And that’s revenue, not profit, and a lot of costs are going to marketing, not to filming and casting. That’s a lot of money, but it’s not the scale that OpenAI and Anthropic are at. Video generation would only make sense at that scale if it was targeting individual consumers, but then it’d need to cost something that consumers are willing to pay - which practically is probably a few hundred per year at most among US consumers, and much less globally, so again it doesn’t solve for the size of the AI companies. I don’t see a way that video generation becomes a big industry without making generation much much cheaper.
      - fc417fc802 4d ago
        Aren't these two largely separate questions? Viability versus if a given incumbent has interest in a market of a given size. With the combination of (at minimum) streaming platforms, the box office, and advertisements video and audio generation would be viable at a remarkably high price point (as compared to the current token prices for other sorts of things). And as the price comes down presumably the market would grow larger - by how much I have no idea but there are certainly a great deal of currently underserved niche markets.
zer00eyz 4d ago
If you reshuffle your argument, and apply the same facts you get to a similar conclusion but with a drastically different spin. > it's more specialization China, constrained by hardware, and talent (not to slight the Chinese, but they are limited to domestic resources - and much of the US effort is very international). They did, what the Chinese do, and optimized the process of production, and drastically lowered the cost of development of their models. Cheeper to build, cheaper to run is just good economics. Meanwhile in the us, we have open AI doing "experiments" - it looks like the costs around the hugging face hack are going to be about the same as China would spend on building out one of their smaller efforts (several million dollars). (Depending on whos numbers you trust, the fact that I can even make this claim should make you raise an eyebrow). Go back to the 80s' and "expert systems" - most people will tell you that for their time, they were amazing, and useful. People would have loved to have more of them but they were so cost prohibitive that we all but abandoned them for serious use. The US frontier labs seem to have forgotten this lesson and their calls to "slow down" look like an excuse to "cut the waste so we can move to making money".
sellmesoap 4d ago
I think what will keep the industry afloat, all else failing, is the surveillance industry! Nothing like a fat reoccurring cheque from the government to check if little Jimmy is committing thought crime!
pilooch 4d ago
That's unless the code produced in the future is much more complex than today's.
- zahlman 4d ago
  Sure, but it would be actively bad to make the code more complex simply because we have machinery that helps us deal with the complexity. A big part of how people assess the models' coding capability is whether they create needless, incidental complexity.
  - vasco 4d ago
    That's like saying it'd be actively bad to make the code more resource intensive simply because we have machinery that helps us deal with the extra requirements. And as we know as computers got more powerful code didn't get lighter. If it can, it will.
    - detourdog 4d ago
      Using more resources than necessary is actually waste.
      - vasco 4d ago
        That's my point
        zahlman 3d ago
        I'm confused. You started out with "That's like saying", but you appear to agree with me completely.
- kennywinker 4d ago
  Assuming it’s all going to be vibe coded garbage, yeah it will be much more complex. Like a toddler writing a symphony.
larodi 4d ago
They need the right harness and either your help it auto produces in time enough content to further improve.
- kennywinker 4d ago
  A classic big ai talking point. Color me skeptical.
vunderba 4d ago
> People are realizing that what they need isn't more general intelligence, it's more specialization. A small but well tuned coding model... It’s not quite as simple as that. Several studies have shown the opposite: models trained on more diverse knowledge tend to cross-pollinate across domains. So a more generalized model can actually perform better than a specialized one. That’s why you’re not seeing tons of tiny models (one for Python, one for Pascal, one for Rust, etc).
- lelanthran 4d ago
  Problem is conflict of interest: the studies are mostly from the providers of the biggest models, or someone who received free tokens to do the research.
  - phoghed 4d ago
    It would be nice to hear exactly how the conflict of interest has impacted the specific studies and how they are wrong rather than conspiracy theory level speculation and hand waving at the entire category
    - butterNaN 4d ago
      I think is more than reasonable to be suspicious of studies funded by party with conflict of interest. Think of how many studies about climate change were funded by big polluters, for example. In 2026, the default outlook should be suspicion for any big private organisations with profit motive.
      - phoghed 4d ago
        I think it’s less than reasonable to operate mainly on vibes, rumors, and hearsay. You don’t need to think about climate change studies. Instead you can read the allegedly tainted studies we’re actually talking about and profess to all of us what is wrong with them. You can’t point to exactly where they’ve fudged them.
e_y_ 4d ago
LLMs needing less compute would actually be a good thing for Nvidia due to Jevons paradox. Right now token costs are an impediment to using AI more broadly, and more efficient models would help adoption in cases where AI has proven to be useful, like coding. https://en.wikipedia.org/wiki/Jevons_paradox https://en.wikipedia.org/wiki/Jevons_paradox
- kennywinker 4d ago
  Perhaps. But their huge valuation is based on them supplying the massive buildout of data centers that’s happening / planned. If that dies because a lot of people’s needs turn out to be met by a system at home they can run a 30b-150b model on, a lot more of that money goes to apple or intel or amd.
- janalsncm 4d ago
  Jevon’s paradox is a common talking point but it is not a law of nature. LED lightbulbs use 80% less energy than incandescent but you don’t see people using 5x more lights on their homes. The overall energy used to light homes has decreased. And even if compute demand were perfectly elastic it’s only a good thing insofar as it drives demand for new Nvidia hardware. If tokens can be served from Apple hardware or Google hardware or Huawei hardware that doesn’t help Nvidia.
  - kennywinker 4d ago
    > LED lightbulbs use 80% less energy than incandescent but you don’t see people using 5x more lights on their homes. I mean… some homes definitely do. You must have seen those houses that are all lit up front the outside by lawn mounted spotlights.
  - tonyarkles 4d ago
    As I look up and see three lightbulbs side-by-side over my desk and another one in the lamp on the desk… which is dramatically more light than the old 100W bulb used but also lower energy consumption.
    - 4d ago
keeda 4d ago
This is the right kind of analysis, but we can look broader. Both the demand and supply situations are a lot more extreme and dynamic than appears at first glance. E.g. to your points: 1. Yes, smaller models will become more popular, especially as the tokenmaxxing trend dies down and people start stretching their budgets farther. That is a downward pressure on demand. But along the same dimension, consider that currently only about 40 - 60% of the world uses AI for only about 5 - 15% of their work hours. That means there is still 2x growth from users and 7x - 20x growth from the rest of the work hours left to capture! That is 14x - 40x more demand. Then consider that agentic tasks require multiples more tokens, and that is the kind of usage that is most likely to be deployed, and also the kind of usage that is the least used right now. That's another huge multiple to be tacked on. And the entire AI industry has been lamenting the extreme compute crunch they're facing (and also why Claude has 9's comparable to GitHub; whereas OpenAI has been chugging along because Altman was OK being called a "podcasting bro" while desperately scrounging for compute years in advance.) Nvidia's meteoric rise is entirely due to this kind of exploding demand with extremely limited supply. 2. Competing hardware is definitely a threat, but it has its own hurdles. Because the real bottleneck is not Nvidia, it's TSMC. Pretty much all demand for all chips in all devices in all the world flow to, like, 3 companies in the world that actually fabricate them, and TSMC is the biggest. And the supply is extremely tight, as the exploding costs of electronics clearly shows. So now TSMC will of course try to keep all its customers happy, but it will inevitably be forced to choose which ones it will keep happiest. And those will be the customers who can pay it the most. And that would be the one with all the money from its de facto status as a monopoly (and possibly even a monopsony)... Which would be Nvidia ;-) So yes, compute per task is falling rapidly... but it's barely a dent in the humongous total addressable demand, and the amount of hardware to support that compute is still very constrained, and most of that supply will likely flow through Nvidia.
- kennywinker 4d ago
  > But along the same dimension, consider that currently only about 40 - 60% of the world uses AI for only about 5 - 15% of their work hours. Ah yes, i am constantly lamenting that my barista isn’t using ai enough ;) Hopefully you’ve adjusted your ceiling numbers to account for the large amount of people who can’t afford to pay for llms, and will never be able to pay, and aren’t worth it to advertise to since they can afford very little

SleightOfHand 4d ago

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spunker540 4d ago
Do you use coding agents? Just curious bc from my experience using coding agents, open ai’s codex is neck and neck with anthropic’s claude code if not ahead. I wouldn’t agree that OpenAI hasn’t done anything since ChatGPT since codex is my daily driver for software engineering
- ravenstine 4d ago
  It's kinda nuts to me how people can act like Claude is lightyears ahead of OpenAI models. Sure, it's one thing to simply have a preference or claim that Claude does some things better, but in reality they are both about as effective at doing the same job. I've long preferred GPT models because they know better how to shut up and don't seem to overthink as much as Claude, but I'm under no illusions that if OpenAI went belly-up then I couldn't do my job essentially the same with Claude. GPT models have also clearly improved over time in terms of programming. There haven't been any "big bangs" necessarily, but it's really not hard to give the same task to 5.3 and 6 and see which one has better output.
  - lelanthran 4d ago
    All the models converged, in every single generation since 2022.
  - applicative 4d ago
    Nothing in the world is comparable to Fable. You presumably have a narrow specialized use case like programming.
Kiro 4d ago
I've paid more money to OpenAI than I've spent on all other products I pay for combined the past 5 years.
4d ago

jqpabc123 4d ago

Granted OpenAI going insolvent All the "frontier" AI companies *are* currently insolvent. They have never been anything other than cash burning machines. The only way they keep the lights on and the doors open is by borrowing money --- and epic amounts of it. If those operating the cash spigot decide to turn it off, all AI companies will likely be similarly affected --- and so will Nvidia. OpenAI expects to burn through more cash between 2024 and 2029 than Uber, Tesla, Amazon and Spotify did - combined - before those companies started making money https://www.morningstar.com/news/marketwatch/20251205243/this-crazy-chart-shows-just-how-much-cash-openai-is-burning-as-it-chases-ai-profits https://www.morningstar.com/news/marketwatch/20251205243/thi...

oblio 4d ago
To make things worse, hardware prices have spiked, due to AI companies. Fairly sure data center construction costs are also going up (they require so many resources that everything is constrained at the moment, especially electricity production). So I don't understand in what world these frontier AI companies can somehow become profitable. The basic tech they're using is basically the same. Yes, around the edges there are a lot of things that can be done, and were done, like caching, batching, mixture of experts, etc, but basically everyone has done all of that by now, and they're still losing money. So: Total costs going up a lot - revenues per unit not increasing proportionally, if anything, Chinese models are forcing those down. How does that math work out to profits? I don't see it. Or about as bad, after trillions of dollars in investments over multiple years, let's say the entire frontier AI sector has a total profit of $20bn by 2030. In what world does that make sense? Assuming they can scale that total profit to $100bn in 2035 without investing another cent from 2027 to 2035 (utterly ridiculous), the return on investment would happen in roughly 20 years.
- jqpabc123 4d ago
  It's capitalism run amuck --- and on an epic scale. China is the one that is really in the driver's seat here. They have the opportunity and the ability to nullify/wipe out our huge investment in AI.

ak_111 4d ago

Devil's advocate: OpenAI not being able to use compute is highly correlated to many other AI companies not being able to find a meaningful use of this compute. Failure to take into consideration those kind of correlations ("If my biggest client isn't able to buy it, I would be able to find someone else who will") is one of the principle causes why many risk models turned out to be garbage during the Great Financial Crisis.

spott 4d ago
That is why I added the last line. But I also doubt Nvidia is on the hook if OpenAI just no longer wants the compute. I bet they are only on the hook if OpenAI cannot pay for it (is insolvent in some way). I also have to bring up that OpenAI has already spat out an inference chip that beats Nvidia on flops per watt. So they could potentially not need the compute while other ai companies do.

InsideOutSanta 4d ago

> if OpenAI can’t use the compute, someone else can. The problem with that is that OpenAI can only afford to pay for the compute because they are burning investor money (and so are most of OpenAI's biggest clients). They are losing billions. If they stop burning money, nobody else will be there to pay for that compute at OpenAI's cost. Sure, somebody will probably be able to use these GPUs, they just won't be able to pay nearly as much for them as OpenAI does. In reality, it's just nowhere near worth as much as OpenAI pays for it. Inflating the cost of compute is part of the problem caused by the circular financing, and if (or maybe when) OpenAI goes, the price of compute will go with them.

andsoitis 4d ago
> investor money But that’s the point. Investors believe investment in AI will pay off.
- InsideOutSanta 4d ago
  Right, "believe".
  - andsoitis 4d ago
    That's how all investment works. That's how money works. You believe some story. Not everyone believes the same story.
    - InsideOutSanta 4d ago
      Believing only makes things true for so long until things fall apart. You can't keep burning billions every quarter. At some point, you run out of investors who believe, and the ones you have run out of money (see: Softbank).
      - andsoitis 4d ago
        Yes of course. Is the point you're actually trying to make that investors are making a pure call, so their belief in the story is misplaced? That they should believe a different story?

CoolestBeans 4d ago

The problem is that if OpenAI doesn't want the compute nobody does. All of these companies' demand for compute are correlated. It isn't likely that OpenAI will want less compute in isolation. Furthermore, the circular financing structure means that if OpenAI buys less chips it means that Nvidia has less money to give to say Anthropic to buy more chips and suddenly the exponential growth that circular financing has allowed to grow runs in reverse.

59percentmore 4d ago

This is the fun part: the AI bubble bursts and the price of components keeps rising. Why? Because companies can just sell you a glorified thin client and force your average user to buy their compute, all subscription-like, from data centers.

0xbadcafebee 4d ago

> if OpenAI can’t use the compute, someone else can How? The hardware is in OpenAI's datacenters. Does Nvidia have a couple hundred semi trucks, contractors, and IT technicians, to repo the hardware and resell it to someone else before it's lost most of its value? These chips will be replaced approx every 3-4 years. So if OpenAI tanks, after Nvidia pays for and waits for the process to collect the hardware, they then have to sell it for pennies on the dollar. They lose almost all the investment. Also consider that SpaceXAI already had datacenters full of gear that they basically weren't using because nobody wanted their product, so they now rent it to Anthropic. The demand for hardware isn't really there at the scale of OpenAI.

tiznow 4d ago
>Does Nvidia have a couple hundred semi trucks, contractors, and IT technicians, to repo the hardware and resell it to someone else before it's lost most of its value? Via logistics contracts, yes.

BobbyTables2 4d ago

If AI wasn’t a thing would Nvidia be worth 1/10th is current value? Gaming is lucrative but not THAT lucrative…

rgmerk 4d ago

Maybe I’m just old and cynical but that sounds like the kind of assumption of independence of events that led to the GFC .

wsatb 4d ago

> The reason Nvidia is comfortable making these deals is because if OpenAI can’t use the compute, someone else can. They have no idea how much compute will be needed. They are estimating and trying to push it but they do not know the future.