Comment by randomNumber7
3 months ago
I would have thought that the OpenAI bet is way more risky, because if someone comes along with a better model it could really hurt OpenAI. NVIDIA seems harder to dethrone imo.
3 months ago
I would have thought that the OpenAI bet is way more risky, because if someone comes along with a better model it could really hurt OpenAI. NVIDIA seems harder to dethrone imo.
They probably know more than us. Such as alternative chips or that the Chinese will go in-house sooner than we think. Nvidia’s moat is not as permanent as people think.
> They probably know more than us. Such as alternative chips or that the Chinese will go in-house sooner than we think. Nvidia’s moat is not as permanent as people think.
This is Softbank though, they're not really noted for great investment decisions (apart from Alibaba really early on).
Like, my prior is that when Softbank invest in something, the growth is done (but then I am, very much, a cynic).
Softbank had 5% of Nvidia stock just before gen AI boom. Then they sold it when it was at its lowest. If they didn't it would have covered all their losses many times over with a profit of more than 200 billion dollars.
It's just baffling they are still getting billions to spend.
[1]: https://www.wsj.com/articles/softbank-sells-entire-nvidia-st...
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Broken clock is right twice a day.
Softbank has literally done this before. Several years ago, Softbank sold it's Nvidia stake and later regretted it to such an extent that Masayoshi Son expressed his feelings by crying. They're only selling Nvidia stock now to fulfill a prior giant cash commitment to OpenAI. Also, Nvidia is positioned to own a sizeable chunk of OpenAI.
I was just thinking that they must be selling because they need the cash...
Not to mention the US companies probably want to develop their own chips to get away from Nvidia too. I don’t really see why any company would want to base their entire business on the whims of nvidia.
Given how poorly Intel and AMD have fared, it suggests the hardware moat is much deeper than the software one.
Nvidia's moat is their pace of performance growth, which is hardware + software + cultural.
If they skip a beat, or it becomes impossible to increase performance (TSMC node stumble or P4-style dead-end), then it won't take long for someone to catch up.
If they keep executing on better hardware performance + software to support it? They keep the money spigot on.
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Nvidia doesn’t make hardware. It designs hardware. TSMC makes hardware.
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> Nvidia’s moat is not as permanent as people think.
Neither is OpenAI's.
nvidia's moat is still pretty strong and deep, while there have been many other models in competition with openAI's.
> Such as alternative chips or that the Chinese will go in-house sooner than we think. Nvidia’s moat is not as permanent as people think.
SoftBank have holdings in Arm and likely to know what is coming down the pipeline.
Wouldn't that be insider trading?
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They sold all their stake in 2019 too look it up. For sure they know more then .. just missed a 40x bagger
>They probably know more than us.
If they are privy to information that we don't know that led to this discussion, isn't that insider trading?
The entire AI bubble think they know better than us. Thar doesn't means they're right.
Does OpenAI even have a moat?
Softbank is the example that you could use against the conspiracy theorists.
They may know more, but not that much more.
> SoftBank has been a repeat investor in Nvidia. It sold off its investment before the AI boom took off and then bought the chipmaker's shares again before divesting in October to double down on its biggest investment bet, OpenAI.
In many ways OpenAI is transitioning towards an end-user facing product business. They have by far the strongest brand among consumers and are positioning themselves to take on Google/Meta in the ad business.
By proxy, having the strongest frontier model becomes less and less necessary for them and instead building a strong product by properly layering medium-strong models in a cost-efficient way is the priority.
I'd argue their brand might be too strong, ChatGPT has already begun to enter the same semantic space as "Velcro". Everyone I know seems to have tried it yet quickly you begin to realize that for most people ChatGPT == LLM, it seems everyone is using "ChatGPT" on completely different platforms.
In the end, regardless of technical understanding, people will always shop around on price if the feature set is similar enough I suppose.
The thing is, laypeople aren't using anything other than Google Search even for LLM answers.
If I want an LLM answer to "is erythritol bad for you", I'm not firing up ChatGPT. I'm just typing it into Google, and the LLM answer it spits out is pretty good.
ChatGPT needs to be significantly more compelling for most people to use it for one-shot LLM answers over Google Search. And the minute Google removes the one-shottedness of its search answers, it's over for ChatGPT.
Imo ChatGPT is just "a feature not a product", in the search engine space, as the adage goes.
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ChatGPT though isn’t where the profit id going to come from. Businesses using LLMs are and Amazon (AWS) is not selling access to Bedrock and neither is Google (GCP). Models are becoming a commodity. *Every* implementation I’ve done one of the requirements is to easily be able to switch between multiple models
This argument regarding brand loyalty gets repeated but it’s really weak to me. The immense majority of people don’t tie their identity to the software services they are using. Without network effects or an ecosystem locking customers will switch as soon as there is a less expensive and/or better alternative, as the history of software has shown countless of times.
Keep in mind how severely the quality of Google search results or e.g. any consumer facing piece of Microsoft software (Windows, Office, OneDrive, etc.) have deteriorated to the point it has far transcended the more nerdy corners of the web, yet both continue to retain a strict grip, thanks to buy in/brand strength.
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no but there’s the network effect that Google has / once had with search that OpenAI has with ChatGPT: user interactions. all that data and classification will help tremendously getting better datasets, which is equally important (or more important) than better algorithms.
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> They have by far the strongest brand
Just like Blackberry, but instead of having to buy an new device to switch to the competition, the customer just needs to click on a different website.
Not a great analogy. Blackberry was never really for mass consumers and was always business-first. They lost to Apple because Apple won the mass market, and the mass market overwhelmed the specific niche business use-case that was BB.
OpenAI is already the consumer-first AI platform. And, in my opinion, in the minds of the average consumer, the biggest one that is "an app" with memory and folders, vs. something like Gemini which is perceived as an extension of Google Search and thus doesn't have the same "knowledge database" UI.
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> They have by far the strongest brand
They don't really, because of Gemini and Grok.
If it was OpenAI vs Claude then yeah, ChatGPT is known whereas Claude you have to be an enthusiast to know.
But everyone using Google runs into Gemini and everyone using X runs into Grok, and people talk. Now even the laypeople know there is more than one AI, and they're from big brands that they trust. Which means that people will window shop for the AI with the best performance per cost. Bye bye brand power.
Twitter never had a meaningful customer base compared to Meta and it’s been declining since Musk took over.
Does anyone trust Xitter? If so, they shouldn't.
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It’s going be pretty hard to dethrone Google when even Apple is going to Google for AI with another huge billion $ contract.
In fairness, that is for their model, not their brand. In this industry, the mind share and buy in OpenAI has is still second to none, even when Gemini 2.5 Pro served the vast majority of users far better than the OpenAI models, the latter MAU trounced all competitors.
We do not know for certain as of yet, but I’d be very surprised if Apple felt the need to loudly communicate to their user base that the upcoming Siri improvements aren’t Apple Intelligence. They won’t lie of course, but Googles brand in the space isn’t nearly as strong with the layperson, whereas they more than happily shouted their use of GPT from the rooftops initially.
This year.
Apple is in the business of contracting out new-hotness until their polish is done.
Then they put their name on the thing, pretend it’s new technology – and depending on the named feature, sometimes it is!
It's hard to see how they become profitable enough to justify current valuations.
The numbers are just mind boggling even in the optimistic scenario.
If they are able to actually successfully pivot into ads as a business model, it's very easy to justify the valuation: Just look at Google/Meta.
I'm personally skeptical that they are able to pull off ads, at least on the short timescale they likely need to. They more or less have to nurture/disrupt a whole SEO industry, and the way big corps allocate advertising budgets are very slow to shift (many are still struggling to find their footing in social media advertising).
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I can see a world where if everything they do pans out, on average 1B "entities" end up paying 20$/mo to openAI, via the myriad of integrations they end up supporting. Where entity can be a user, and one human can have many entities (i.e. a work account where the company pays, a personal account, etc). That'd be a quarter of a T$ revenue / year. Dunno, while the number is so large it's hard to compute, it somewhat seems plausible.
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Their goal is obviously to take a fraction of the world's economy, proportional to the productivity lift they can attribute to themselves. That's in the trillions.
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It's SoftBank though, weird risk taking investments seems to be their jam.
That's how you get to have $6B to throw around on just one part of one your strategies though to be fair.
It's because they are playing with other (dumb) people's money.
Yea, I was thinking the same thing.
Probably so, but that doesn't mean their value can keep scaling without heavy diminishing returns. Softbank must assume they've taken 80%+ of the gains from this phase of NVIDIA's growth, and want to capture the next wave of growth.
I agree with you that OpenAI seems much more risky in terms of it's actual true viability as a business, but the risk:reward must be there for Softbank.
They want to profit from the IPO of OpenAI. Private investors get a free 20% - 30% gain not available to the retail investors.
SoftBank is the world leader in turning safe bets into risky ones.
Without a doubt, in my opinion, OpenAI is a risky bet, but perhaps Softbank can make some money on OpenAI and then get out.