[bustling-noose]

>though nowadays they have more competition in that area

This is what is called lack of moat. If today, every router beyond 1Gig was made by Cisco then the moat would be so wide that the internet would literally not exist without it.

The three things that any value investor values in stocks - Great management, good reinvestment of capital and a really wide moat. Cisco didnt have a wide moat. Nvidia currently does, but it may go away sooner than later as they don't really have any special sauce to their graphics cards as such. Same goes with OpenAI, or Qualcomm (Apple made a modem now) or any other tech company with an illusion of a wide moat. Tech businesses only have a wide moat until someone decides to compete seriously and that can usually be done with a lot of money in a relatively short time.

Some of the businesses like Walmart and Cosco for example have a really wide moat in the sense that their business is not something that someone with just money can beat in a few years. Look how amazon setup physical stores with money and failed. It's extremely difficult to setup that kind of business. Trust from suppliers and consumers takes decades in those kinds of businesses.

If your business is relying on a moat that someone can beat with R&D and money in a few years, then you don't really have a moat.

[huijzer]

> The three things that any value investor values in stocks - Great management, good reinvestment of capital and a really wide moat.

I’ve read a lot about value investing and I’m afraid that your statement is an oversimplification. Chuck Ackre for example is similar to you with his three legged stool, but Peter Lynch has another approach, and Buffett has another slightly different approach. There are as many strategies as there are value investors.

[api]

nVidia's moat isn't really that wide. It's mostly the quality of their software. Their chips are good, but there's nothing particularly proprietary about wide vector math units and fast RAM.

AMD's cards are about there, but their software has a bad reputation. Apple's highest-end M chips are pretty good but they need a big faster RAM and they're also expensive. Intel's Arc is promising. Other competitors are sure to appear.

[stickfigure]

Also if your hardware goes obsolete in 5 years, it means twice a decade your customers are forced to decide to buy your next version or a competitor's.

[bustling-noose]

And many companies like to have a portfolio of both, or an offer at least from the closest competitor. Tim at Apple for example played this game for decades to make sure he always received competitive prices for parts. They tried to pull it off with modems and it backfired badly. So they built their own. But if QC was to play really nice with companies like Apple and Samsung etc, they could actually maintain their moat. But then good management is another important requirement which is a problem here.

[no_wizard]

>was to play really nice with companies like Apple and Samsung etc, they could actually maintain their moat.

This gets in the way of maximizing quarterly earnings. The issue would be price fluctuations which means some quarters will be lower and some will be higher, and it may not average out the same year to year relative to what investors usually expect.

Management therefore lacks incentives to play well with others, and thus they don't

[datavirtue]

I have wondered for years if a business could set their prices low enough so that competitors would not be interested. This happens as soon as you have three or four well know competitors trying for market share, and one inevitably loses interest and bows out.

[talldatethrow]

IMO this used to even be the value proposition for blue collar trade service companies. They had expertise, they had advanced tools and equipment, they had some economy of scale buying in bulk... So they would give you prices for things that even a DIYer would look at and go "well geez, that price is so fair I don't even think I could compete doing it myself. Where do I sign??"

Now that is totally gone, partially I think to tradesman/small business owner social media influencers, and prices are set as high as the market will bear. Sure, they're so high way fewer people are installing new sliding doors, but hey when they find one they make an extra $3k in 7 hours. Why do three jobs a day and make $2k profit when you can wait for the wealthier or more desperate person and make it all at once and go home?

[datavirtue]

Yeah, I see billboards all over for fast same-day water heater replacement. I wondered WTF they were advertising such an easy job all of the time, every company. It's because they are charging people thousands of dollars to roll in a new water heater. Quick, easy, barely any skills required. Apparently no one can handle it.

Mine runs on gas and used to be soldered directly into the plumbing . Last time it went out I converted everything so that anyone with an adjustable wrench could do the job in 15 minutes. $500, new water heater done. The hard part is going to pick it up from the hardware store.

I got my AC swapped out for $3000. Single post to Facebook was all it took to save $7000. Being helpless is expensive.

[huijzer]

Yes it’s usually called economies of scale. Classic example is building a big factory with investor money. The big factory can then outcompete competitors due to having bigger scale. Carnegie did this a century ago. Nowadays we see this a lot with Venture Capital. Companies just write some software and give the product away for free so that the competition has no chance. Microsoft also is great at this for example with giving away GitHub for free.

If you want to read more about “powers” like this I can recommend 7 Powers by Hamilton Helmer.

[bobthepanda]

The counterbalance is that it takes a long time to steer a big ship, and economies of scale can actually hurt you. If you are building the wrong widget it doesn't really matter that you can make a billion of them. Even scaling down a big business might not work if most of your costs are fixed.

[flipthefrog]

Funny how usage of the the word moat simply exploded here on HN a few weeks ago.

[stickfigure]

This word has been part of the core vernacular of HN for as long as I can remember.

[ToValueFunfetti]

Looks like a real effect:

https://hntrends.net/compare/words?words=moat,castle,roi

[stickfigure]

Sure - right now there is a firehose of money being pumped into money-losing AI companies. The technology is revolutionary but a lot of us are wondering if the winners will be the early movers with big pockets or the late movers using newer/cheaper techniques. There's a gold rush and the question of "moat" is on everyone's mind.

But this isn't the first gold rush in the tech industry and folks have been talking about moats here forever.

[ToValueFunfetti]

That's the broad trend, but I think the spike that they're noting is specifically downstream of DeepSeek, as it peaks in late December of last year.

There's an initial peak in 2023 (haven't looked it up, but I'd bet that was when 'OpenAI has no moat' was on the front page for a while), and then it settles down a ways above the previous average. Since December it's been 1.5-2x more frequent than where it settled after that first peak.

[potato3732842]

It ebbs and flows, like every other circle jerk ping ponging around within an insular internet community.