|
> Nvidia now has huge amounts of money to invest in developing new technologies This is not actually a reason for investors to invest in a company, because it's caused by investors investing in the company. If the market would invest in some other company instead then that company would have huge amounts of money to invest in developing new technologies. Meanwhile the ones that tend to succeed in that are more often new, nimble companies breaking into or creating a new market rather than large established ones with bureaucracy, internal politics and fear of cannibalizing existing sales. Example: If there is a popular new application for consumer GPUs that requires a lot of VRAM, a competitor could make a lot of money by developing consumer GPUs with a lot of VRAM, but Nvidia would have to worry about that eroding sales of enterprise GPUs. Then investing in the competitor could have a better return, both because of potentially higher growth (people invest $5B in developing the GPU and then it becomes a $100B+ company, huge ROI; very little chance of Nvidia going from $3T to $60T), and because when it happens it comes at the expense of the incumbent, who loses not just the consumer GPU sales but the enterprise ones to the competitor selling for consumer prices. Which means the incumbent still has a very significant risk of losing value, but without as much potential upside. People often try to make this argument by pointing to Microsoft or Apple, but those are major outliers who got there through anti-trust violations. Meanwhile Kodak, Xerox, Yahoo, AOL, Sears, IBM, GM, GE, etc. > very little of the stock market is about the actual value of the company itself, but speculation That's the hype cycle. We know which section of the graph we're on right now. |