Comment by qalmakka

I'm not sure that's a fair comparison. The difference in the product lifecycle is too big. A GPU has a 3 year depreciation cycle and continues working for well over a decade after that, if I buy gas today I need new gas tomorrow. The market can react in the timespan of years, it can't react in the timespan of weeks, and having a product that isn't used up makes timelines more elastic.

If we eliminate both factors by imagining a world where GPUs just stop working every three years and where AMD doesn't have time to ramp up production we'd be pretty screwed without Nvidia, and everything depending on GPUs would quickly grind to a halt. AMD sells a tiny number of dedicated GPUs compared to Nvidia, and right now they have no spare capacity

I think you're missing part of the story with stocks like NVDA. The value of a stock is also based on expectations, so it could be that all of NVDA's growth for the next decade has already been frontrun by the market, and it's essentially partly a prediction market on how valuable the infrastructure will be for AI, given that the chip requirements will only increase as AI systems are implemented in more and more hardware (robots / appliances / transportation / medicine, etc.). While the growth potential of carbon fuels really remains as it is with modest growths aligned with demand/population, but tempered by alternate energy taking greater and greater marketshare.

So it could simultaneously be hype (very optimistic predictions) and yet still valued appropriatey by the market with future expectations priced in, just with some additional premium due to that demand/hype.

> Nvidia has current market cap equivalent to ~8 times ExxonMobil.

$XOM's current revenues are known and no one will suddenly be throwing billions at them for CapEx purposes. People are throwing billions at the general direction of $NVDA. That's the difference: which company has a better change of (growing) more revenues and profits in the future?

> The AI stocks nowadays are pumped up by pure hype, and it's inevitable that the market will recalibrate sooner or later

And until that recalibration happens you can buy now and see your holdings go up; then, once you're happy with the ROI (10%? 20%? More?), you can sell and realize your capital gains and have a large number in your account. Or you can not buy now and potentially miss the ride up.

Just because The Market™ is (allegedly) irrational does not preclude the possibility you can make money.

> If tomorrow ExxonMobil disappears from existence, you'd get half of the world paralysed. If Nvidia tomorrow gets replaced by a massive hole in the ground, you'd just shrug, go down the road a bit and buy AMD.

That's the wrong way to think about it, because the stock price is about all future profit over time, not the current moment. Over the next 50 years, which one do you think will have made more profit?

Imagine you're in the year 1900, and you're comparing a light bulb company with a steam engine company. Industry needs steam engines, you say! Half the world would paralyze if they stopped working! Meanwhile, who cares about a light bulb company?

But you can understand why light bulbs actually turned out to make much more money moving forwards.

You should probably think of it with a different perspective. The long term outlook for oil majors is stagnating at best. They provide great logistics for fuel globally but haven't expanded past that.

If we continue to go to electricity and go via solar, energy storage, wind and nuclear - you end up in a spot where oil and gas are limited.

NVIDIA has blue sky ahead of it -- are valuations totally out of line? Most likely. That said it has a highly desirable product globally. Oil is a valuable commodity but there are many other providers that could snatch up exxonmobil share.

Also if you want a better example -- good look at any critical supplier in the food space. Thats way more important - we lose that we get in a world of hurt.

All you're really highlighting is the difference (from an economic perspective) between needs and wants. The world needs petroleum. But once that need is met, extra petroleum production is pointless.

Whereas the world (or, perhaps, a specific class of investors within a specific segment of the world) WANTS generative AI. The amount someone wants something (and, by extension, is willing to pay for it) is potentially unbounded, and can even be uncorrelated with real utility. (See: gemstones, trading cards, cryptocurrency...)

I wouldn't be so quick to pick on AI hype. Investors are always desperately looking for where to put their money. That it is AI suggests, perhaps, that all the alternatives look less promising right now? (And that is a bit tragic.)

That's because businesses are valued by how much money they make, not how essential they are.

ExxonMobil has a market cap essentially infinitely larger than my local water supply and the farms that grow my food.

you're right, but it brings up an even bigger question in my mind -

If farms where wiped out we a huge percentage of the population would no longer exist, yet they 100% are a commodity with low margins.

We don't value things based on long term risk/need

I hope this doesn't come across as pedantic and negative, but there is a good reason Why a resource extraction company in a market that topped out a few years ago has got a lower than average PE ratio.

On the other hand, Nvidia is a result of the AI bubble. Oddly, though, there's a case to be made that Nvidia could come out of this, even after a correction, looking pretty good.

But what I really can't grok is how Tesla keeps an insane P/E ratio after several consecutive quarters of bad news. Or how Grok gets a high valuation without even anything close to OpenAI's money-losing revenue levels, while swallowing a decrepit old social media site. Or how that big rocket can keep blowing up without dinging the valuation.

> Sure, they can't make cards as fast as Nvidia does

They both use TSMC. If Nvidia disappeared, TSMC would have more capacity available.