Comment by timmg
1 day ago
They will, I'm sure.
The big difference is that Google is both the chip designer *and* the AI company. So they get both sets of profits.
Both Google and Nvidia contract TSMC for chips. Then Nvidia sells them at a huge profit. Then OpenAI (for example) buys them at that inflated rate and them puts them into production.
So while Nvidia is "selling shovels", Google is making their own shovels and has their own mines.
on top of that Google is also cloud infrastructure provider - contrary to OpenAI that need to have someone like Azure plug those GPUs and host servers.
I am pretty sure OpenAI has data centers of its own.
The own shovels for own mines strategy has a hidden downside: isolation. NVIDIA sells shovels to everyone - OpenAI, Meta, xAI, Microsoft - and gets feedback from the entire market. They see where the industry is heading faster than Google, which is stewing in its own juices. While Google optimizes TPUs for current Google tasks (Gemini, Search), NVIDIA optimizes GPUs for all possible future tasks. In an era of rapid change, the market's hive mind usually beats closed vertical integration.
Aka vertical integration.
> AI ... profits
Citation needed. But the vertical integration is likely valuable right now, especially with NVidia being supply constrained.
So when the bubble pops the companies making the shovels (TSMC, NVIDIA) might still have the money they got for their products and some of the ex-AI companies might least be able to sell standard compliant GPUs on the wider market.
And Google will end up with lots of useless super specialized custom hardware.
It seems unlikely that large matrix multipliers will become useless. If nothing else, Google uses AI extensively internally. It already did in ways that weren’t user-visible long before the current AI boom. Also, they can still put AI overviews on search pages regardless of what the stock market does. They’re not as bad as they used to be, and I expect they’ll improve.
Even if TPU’s weren’t all that useful, they still own the data centers and can upgrade equipment, or not. They paid for the hardware out of their large pile of cash, so it’s not debt overhang.
Another issue is loss of revenue. Google cloud revenue is currently 15% of their total, so still not that much. The stock market is counting on it continuing to increase, though.
If the stock market crashes, Google’s stock price will go down too, and that could be a very good time to buy, much like it was in 2008. There’s been a spectacular increase since then, the best investment I ever made. (Repeating that is unlikely, though.)
> And Google will end up with lots of useless super specialized custom hardware.
If it gets to the point where this hardware is useless (I doubt it), yes Google will have it sitting there. But it will have cost Google less to build that hardware than any of the companies who built on Nvidia.
Right, and the inevitable bubble pop will just slow things down for a few years - it's not like those TPUs will suddenly be useless, Google will still have them deployed, it's just that instead of upgrading to a newer TPU they'll stay with the older ones longer. It seems like Google will experience much less repercussions when the bubble pops compared to Nvidia, OpenAI, Anthropic, Oracle etc. as they're largely staying out of the money circles between those companies.
And running loads long term profitable may require both lower power use as well as longer chip lifetimes - something associated with lower power use.
aka Google will have less of a pile of money than Nvidia will
1 reply →
Google uses TPUs for its internal AI work (training Gemini for example), which surely isn't decreasing in demand or usage as their portfolio and product footprint increases. So I have a feeling they'd be able to put those TPUs to good use?
I think people are confusing the bubble popping with AI being over. When the dot-com bubble popped, it's not like internet infrastructure immediately became useless and worthless.
that's actually not all that true... a lot of fiber that had been laid went dark, or was never lit, and was hoarded by telecoms in an intentional supply constrained market in order to drive up the usage cost of what was lit.
3 replies →
How could Google's custom hardware become useless? They've used it for their business for years now and will do so for years into the future. It's not like their hardware is LLM specific. Google cannot lose with their vast infrastructure.
Meanwhile OpenAI et al dumping GPUs while everyone else is doing the same will get pennies on the dollar. It's exactly the opposite to what you describe.
I hope that comes to pass, because I'll be ready to scoop up cheap GPUs and servers.
Same way cloud hardware always risks becoming useless. The newer hardware is so much better you can't afford to not upgrade, e.g. an algorithmic improvement that can be run on CUDA devices but not on existing TPUs, which changes the economics of AI.
Selling shovels may still turn out to be the right move: Nvidia got rich off the cryptocurrency bubble, now they're getting even richer off the AI bubble.
Having your own mines only pays off if you actually do strike gold. So far AI undercuts Google's profitable search ads, and loses money for OpenAI.