IMO AWS should be spun out as a separate company.
I’m sure Amazon.com would be fine, but it would take a chunk out of their margins. I’m also sure that their X% ownership of the spun out AWS would cover the difference.
From the point of view of running an enterprise that lasts, though, diversification is important. Financially diversification is probably, in general, bad for EPS. But if you want to run a lasting empire, it's best to not tie it to just a narrow thing.
Certainly couldn't be someone in government trying to pin the NDX100 index.
https://finance.yahoo.com/news/amazon-plans-200b-ai-spending...
It is encouraging to see that investors are punishing what is the greatest misallocation of capital since the dotcom bubble. Investors have figured out that AI is limited to probabilistic and annoying chatbots that are for entertainment and for looking up trivia questions.
DocuSign is currently valued at 30 times its annual earnings. Adobe is currently 16. Amazon is 28 -- has been as high as 50 recently. NVDA is 44.
Investors are basically starting to realise that enterprise are not going to subscribe to software like DocuSign for 50 years. They'll probably just move to odoo or zohosign or something and save a lot of money. So its probably a better bet to put that capital into something like Nvidia or Tesla or whatever. it also looks like the US Fed isn't going to cut rates, so capital is getting more expensive.
Of course, if you are a CEO its great to blame all this on AI and then tell your investors you are increasing AI in your business (see: salesforce whose stock price is down 42% in a year and is now trading at 25x earnings)
You are playing pretty fast and loose with your definition of a "software company" when you include Amazon and NVIDIA in your list. Amazon is many things but it is not a "software company" and neither is "NVIDIA".
Moreover they look like large, inefficient organizations with a lot of human veto points that prevent innovation (requiring more human coordination is an anti moat now)
I think the new nominated Fed Chair is also a hard money advocate and is spooking USD alternatives (gold, silver, BTC, etc.) But hard money can be quite hard on the economy, so that could limit growth.
Bear with me here, I actually do have a point to make: I took my stepdaughter out for breakfast this morning. She is a financial wizard specializing in running large cities, and to explain to her the current craziness of overspending on AI infrastructure, I described "exponential spending increases for linear economic value increases." I may be wrong about this, but I am all for targeting the sweet spot of more efficient smaller AI models that are fit to purpose for specific use cases.
This type of commentary reminds me of the people during the dot com boom who were adamant that e-commerce was all film flam and would never take off.
Consider that it is possible that both (1) we are in an investment bubble and (2) we are underestimating the long term impact of LLMs and perhaps mispredicting where they will land.
This type of commentary reminds of people propping up these LLM MLMs.
Unfortunately, it seems investors now think that all paid software will be replaced by AI generated software, somehow open source projects laundered through generative AI models should finally convince enterprise customers to go with free.
Some of these AI critical posts really are an exercise in Gell Mann Amnesia, man.
Where are the results, tell me? What insanely great products have been shipped by people leveraging/building on top of LLMs...?
Yeah, silence. As usual.
you could decide that if you are a very large company, building software internally to replace a SaaS product is a path forward. Or replacing a premium software like DocuSign with a cheap one like Zoho sign. or just building your own proprietary electronic signature app
It is however impractical for big company to start manufacturing cars or designing competitive GPUs
so the earnings of tesla and nvidia is theoretically more 'stable' than a software application company like salesforce, adobe, etc.
this analysis ignores both the size of the company, and what it does, or whether or not any one of them is a good investment
USD devalued ~10% last year, so some of the losses are already priced into the DJI. When you account for that and sprinkle in ~3% inflation, it has lost value despite being up ~11% in the last year.
If everyone in the industry benchmarks on more or less the same multiples, it becomes a good idea to buy any b2b crud saas trading at 10x earnings because if the big boys see it they'll probably bid it up to 30x
the other classic move is to take a business which really isn't even a new technology, like revolut, and call it a tech business. now suddenly a bank can trade on a 50x earnings multiple instead of 15x like say a bank. many such cases~
multiplying huge revenue by a small percentage to get a big positive number
to multiplying huge revenue by a small negative percentage to get a big negative number
So that's how Kroger managed to lose billions over the last couple of quarters, or how small changes in shoplifting/shrinkage based on store makeup can cause losses to some chains, etc.
They didn't lose money because of their grocery operations. Those margins have increased slightly.
Their margins have increased slightly if you ignore the part where their efforts at grocery fulfillment blew up.
Just because an industry is essential doesn't mean that every firm in it makes money.
Investment is all about belief. When the root cause is the willies, then we hallucinate reasons together.
Crypto and memes have demonstrated us a lot about the drives of individual investors.
Unfortunately it seems that professional investors are not that much more rational (from my limited personal experience with a small hedge fund, and from my years of looking at markets).
My favourite term has always been "taking profits" which is generated by the technical analysis (I loath that term) of looking at the prices: taking an effect and publishing a cause (trying to sound smart).
We are deeply irrational beings; often the more you go up a professional ladder the more rationalisation you see.
During unstable periods, we see lots of weird side-effects and there is a lot that doesn't seem to make sense.
Edit: a better meme could be "The use of AI by funds is destabilising markets"
Disclaimer: I am not a professional investor. I am a cynic.
Can the yen carry trade equation exist outside of belief?
Edit: I just noticed your comment is the one result for your "equation"!! https://duckduckgo.com/?q=%22yen+carry+trade+equation%22
Meanwhile this story just came out: https://newsletter.semianalysis.com/p/claude-code-is-the-inf...
I'm sure they'll all lying though, right?
Or, because it hasn't solved all of the world's problems yet then I guess it doesn't count?
Maybe you're the one overhyping AI.
AI helps me too, and I feel like I ship more now. But what if it's just a feeling and I'm not doing anything groundbreaking? What if I'm just doing what I've always done but at slighly more speed?
This is exactly the overhyping the critics are continuing to strawman their complaints with.
Speaking for myself, I think AI is better than the average dev. And yes I think it is affecting hiring.
But this is very different from saying I think it will do new things that weren't possible yesterday.
Stripe, Square, Shopify, Google, all thrived in some part because their services take a hard problem and make it easier to use. Now more people can take a hard problem and make it easier to use.
All you have to do is look around (esp 5+ years ago) and see the many many BAD, unstable, hard to use, slow, etc versions of these companies
Funny how people leave this stuff out. Yawn. Basic simpleton analysis and takes.
Without the Internet, most consumer electronics would have been far more expensive to build, and would have been strictly controlled walled gardens, but the Internet in general and the Web in particular allowed so many inventors to flourish. Ever since that Genie was let out of the bottle, corporate and government interests have been trying to put it back in, and most companies are trying to build and reinforce walled gardens under the banner of unified app stores that extract insane rents.
> AI is limited to probabilistic and annoying chatbots that are for entertainment and for looking up trivia questions.
That is not a rational assessment of the utility that the technology provides, even today.
(Which makes sense because all of their end user products suck)
Software company is a pretty good description for both.
Just because software plays a role, doesn't make them software companies. It is like saying all companies are "electrical companies" because they require electricity to operate.
I don’t suppose you know a good “for dummies” explanation of why CUDA is such an insurmountable moat for them?
Like, what is it about that software that AMD can’t produce for their own hardware, or for a most important subset, with these $1T market stakes?
AMD may develop their own software layer, but a lot of things already work on CUDA, and the job to port this to a different platform may be non-trivial (or even possible depending on the level of feature parity).
Theoretically the moat isn’t insurmountable and AMD has made some inroads thanks to the open source community but in practice a generic CUDA layer requires a ton of R&D that AMD hasn’t been able to afford since the ATI acquisition. It’s been fighting for its existence for most of that time and just never had the money to invest in catching up to NVIDIA beyond the hardware. Even something as seemingly simple as porting the BLAS library to CUDA is a significant undertaking that has to validate numerical codes while dealing with floating point subtleties. The CPU versions of these libraries are so foundational and hard to get right that they’re still written in FORTRAN and haven’t changed much in decades. Everything built on top of those libraries then requires having customers who can help you test and profile real code in use. When people say that software isn’t a moat they’re talking about basic CRUD over a business domain where all it takes is a competent developer and someone with experience in the industry to replicate. CUDA is about as far from that as you can get in software without stepping on Mentor Graphics’ or Dassault’s toes.
There’s a second factor which is that hardware companies tend to have horrible software cultures, especially when silicon is the center of gravity. The hardware guys in leadership discount the value of software and that philosophy works itself down the hierarchy. In this respect NVIDIA is very much an outlier and it shows in CUDA. Their moat isn’t just the software but the organization that allowed it to flourish in a hardware company, which predates their success in AI (NVIDIA has worked with game developers for decades to optimize individual games).
the second problem is that so many libraries and existing software is cuda only. even some obscure hardware stuff. i discovered the hard way that some AMD thinkpads dont support thunderbolt transfer speeds on their usb-c ports, whereas nvidia ones do
the third problem is that the cost to develop a cuda equivalent is so great that its cheaper for companies like google to make TPU and amazon to make Trainium. its literally cheaper to make an entire new chipset than it is to fix AMd. i dont see companies like apple/amzn/goog etc fixing AMDs chips
although one could argue disingenuously that nvda is a software company because the product they ultimately manufacture is a bunch of blueprints they email to tsmc or samsung who then actually make the chips
Plenty of AIs have flawed epistemology. But nice try.
BLAS is an example though, it’s the tip of an iceberg.
Is it? Or does AMD expect to make a profit and it's cheaper to make your own chips at cost?
which is why nvidia hardware trades at a 4x premium to AMD
its not necessarily cheaper to make chips at cost either. nobody is making them, only designing them. so first you have to design your new chip, then you have to get a minimum order in with the chip fab so big it competes on unit economics, and then finally you have to get your dev team to write a CUDA equivalent software that is a problem so hard its only really been solved by apple, google, intel, and nvidia
only companies with big fab orders can get priority too.. if a company did all of the above and was ready to go, they probably wouldn't get fab capacity until 2030