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.
> It's just baffling they are still getting billions to spend.
When you realize that most investors at that level are degenerate gamblers, and that they're even worse about thinking "the Generals were due!" than your buddy who can't look away from the DraftKings app for more than five minutes, it's not so baffling anymore. The only difference is that when you have that much money, you own the casino.
Bill Hwang of Archegos Capital Management is a close second (lost $20B in two days, and basically brushed off margin calls while his highly overlevered bets were collapsing, incurring $10B+ of losses at the investment banks he worked with).
About 7 or 8 years ago I worked at a startup which got money from Softbank / Masayoshi Son. Our founder and our CTO went to meet him in LA IIRC to pitch.
They came back telling us he was basically asleep during the pitch meeting which was scheduled for only 10 minutes anyway.
Our business/product really had no chance of succeeding at this point and most knew it. We got some money from Softbank anyway - forgot how much. Our management was basically laughing about how easy it was to get funding from Softbank.
I jumped ship a year later or so and that was good timing.
This is one of my arguments that startups are mostly about luck - because smart people who are highly incentivised to pick wimmers, with all the data they need to pick winners, all the people and compute they need to pick winners, can't pick winners.
Mayoshi Son isn't playing the VC game like most traditional VC funds. He's operating on a massive scale and his LPs are sovereign wealth funds, who can have other geo-political priorities than pure profit.
Some people don't know that the usual VC game is often still be profitable for the VC even if their fund isn't profitable. VCs are investing the money of their LPs (Limited Partners), who are usually very large institutional investors with billions under management (think state pension funds, Harvard endowment). Most of the LP's funds are invested in a diversified blend of safer, lower-return vehicles but they take up to 5% and invest it in high-risk, high-return things like venture capital and hedge funds. But they spread it across a dozen or more firms with different strategies.
So each VC is playing a portfolio bets and their LPs are playing a portfolio of porfolios. The LPs just need one of their 12+ VC funds to be a lead investor on a unicorn win. This math usually works out in their favor (there's now >50 years of data). VC funds charge their LPs a yearly management fee of a few percent of the invested capital - whether the fund makes money or not. Over the 10 year life of a fund, this adds up and covers the VCs overhead and very generous salaries - usually >$500K at larger firms. In the VC's view, $500K/yr isn't getting long-term "rich" but it'll pay for a pretty lux life. Even with the VC taking out fees, the LP's math still works thanks to only needing one VC firm to win and if one or two more of their VC funds just return 2x or 3x. It maths up even better.
When your personal worst-case downside is $500K/yr minimum with substantial upside, it's not a bad gig. However, these VC types are generally top-of-class Ivy League grads, who are clearly very sharp and ultra high-potential - the type who'd expect $500K earning opptys on Wall Street, consulting, investment banking, etc.
I think this model and portfolio investment strategy is the result of the fact that VCs can't pick winners, though. They are forced to take this "high-risk, high-reward" position in the portfolio because they can't predict the result of any of their investments, even over a whole fund's worth of investments.
Imagine a world where startup success had nothing (or very little) to do with luck, where you could plug a bunch of standard metrics into a complex algorithm (probably a spreadsheet) and it would spit out an utterly reliable set of statistics on likely return. Something that an actuary could come up with, as they do for insurance/assurance.
In this world, VC isn't high-risk, high-reward. There would be categories of VC fund, some would be lower-risk, lower-reward, others higher risk, and yet others that would be low-risk, high-reward (but priced accordingly).
The fact that we don't have this, and all VC is high-risk, high-reward (and often no reward at all, even across an entire fund), is testament to the fact that we can't pick winners. And the reason we can't pick winners is that startup success is very non-deterministic, i.e. mostly down to luck.
Lottery winners do not tell the world they are smarter than the rest of us, or go on podcasts, write op-eds or start websites telling the rest of us how the world should be run.
> It is hard not to love the degeneracy of Son Masayoshi as a gambler. The trick is to not take it seriously.
Therein lies the problem. People do take it seriously, particularly on the idea that he's now due, and keep feeding him money to make these bets with, instead of tossing him out of the boardroom, like he should have been with his bet on WeWork.
I had 250 shares I bought on a tip and sold for a decent profit then NVDA moon-shotted later that year. That's the story of my stock buying life right there.
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.
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.
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.
People are saying that nvidia doesn't have any moat for 20 years. And nvidia hasn't been dethroned, but grown into the largest company in the world in the meantime.
You can make the same comment for pretty much any company that outsources (some of) its production, and it’d be irrelevant, pedantic and off-topic every time.
You’re also wrong. TSMC produces but a small part of the products that Nvidia sells: the silicon. They don’t produce any of the tens of thousands other components that go in a server.
Its not being pedantic at all. Intel designs chips and manufactures chips. Intel’s major issue is not its design chops - some of its most advanced designs today are manufactured by TSMC.
And calling the actual processor a “small part” of where Nvidia’s value is doesn’t jibe with reality.
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.
I have no idea on the data, but anecdotally I'd dispute this. Regular folks in my life (i.e. non-techies) routinely talk to an LLM and use it to answer questions that 5 years ago they'd have searched for.
The techies are the ones who are steering clear and sticking with search engines in my experience.
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.
There's no viable alternative for either of those yet. Massive network effects around Microsoft office, and Google's only real competition is the equally-bad Bing.
Both DuckDuckGo and Kagi are, purely focused on result quality in 2025 far better than Google currently, but that does not matter if one has no need beyond the most basic results.
And much of the MS Office suite is actually a worse copy of another product, merely copied and forced via network effect. There are more than enough far better alternatives to e.g. Teams and OneDrive. The latter even makes Excel far less reliable to the point of unusability.
Not to mention Windows is easily replaced for the truly average person who spends their entire computer use inside a Chromium browser nowadays. Outside PC Gaming (which is far from the average if we are honest), the vast majority of people never touch software that isn’t already on mobile or more likely exclusively in the browser.
Familiarity and brand strength, not need or compatibility, keep the customer facing offerings of MSFT going. That isn’t inherently unreasonable either, for these people Windows is fine as Chrome works well enough on it and they do not have any needs beyond that, so why switch. Same with search, Google still finds flights, restaurants, Wikipedia, etc.
Being better is worth little if the vast majority are sufficiently well catered to by the incumbent. Even if another OS or search may improve their experience somewhat (better reliability, longer battery life, etc.) that doesn’t trounce the established player as long as the few basics aren’t utterly broken even to them.
You can actively antagonize your users, be worse than the competition, more expensive too, you only loose most if you make the few things most have purely become reliant on and are expecting worse, basically regress.
Reason all the bugs in Windows are fine, after all the memories of most people are dominated by BSODs and just not crashing daily is enough to be considered pretty good, despite the overall experience far worse than most other OS/DE combis.
You don't have to take my word for it. Open the three next to each other, type in a search query. Only one will provide part of the results as a wildly inaccurate "overview" that somehow manages to link to sources telling you the opposite or contradicts itself inside the text box, which can also not be deactivated. Those are the results you get from Google and that alone makes quality worse, pure and simple.
More subjectively, but if you want to ignore the "AI overview" and consider that not results (then why are they on my results page?!), just look for a specific, slightly older video on Youtube, a site Alphabet themselves run. You can provide the exact title down to the letter and are in many instances going to struggle to find it with Youtube search or Googles Video Search, even when wrapping in ", etc. Kagi and DDGs video search tabs meanwhile yield the desired results. Again, this doesn't mean they are amazing or massively far ahead as Google was able to reliably provide such results in the past. It just means that Google Search has regressed, yet users stuck with it because, as I've been saying, quality (or lack thereof) has a hard time overcoming brand strength.
I had DDG set as my default for years and found myself resorting back to google so often I had to finally admit to myself their results were inferior even to the diminished google result. I just didn’t seem to get the result you’re claiming on the everyday type of queries I make.
Kagi gives you free searches and you pay for Google with you data/advertisements so it costs something too, but you knew that already. And both provide more reliable results, so what are you trying to say?
Gaming on PC or using Adobe software is very far removed from the average in 2025. Same if you use any Office application after work hours. Heck, even Canva is, the vast majority of users are not creating on their systems, solely consuming and would be served more than well enough with only their phones. In countries where most of the population has gotten access after modern multitouch smartphones became a thing, most do use these over notebooks/PCs as their primary device, like India.
And friction on MacOS, Linux, ChromeOS, Android or iOS, I don’t see that considering the vast majority still switched to 10 despite the departure from a decades long established environment and, lest we forget, quite a lot of XP/98 software also did not work well on more modern Windows, again, not really a problem for these either. There is no reason not to switch despite the brand, which I again must emphasize, is ok. They are fine enough with the status quo, even though alternatives would be more stable, secure, have better battery life, etc. I just dislike the idea that some in the space cling to that better alternatives are surely going to be adopted and the only reason they aren’t by the masses is compatibility, slight differences in UI, etc.
People use Google search because they have (or rather, need) a Google account. Also, there are no alternatives really, because search is very difficult.
Microsoft has alternatives, but it doesn't matter, because you're artificially restricted from using them. All your friends (MBAs who cut your check) are using Excel, so why don't you just use Excel too?
I have been using DDG for years and even with Google quality having plunged it is neither better nor less expensive (nor the default when non technical users just type in the search bar of their browser). Yahoo has shown that even with immense brand recognition people will still switch if the alternative is really better. And if Google was 2x more expensive than DDG they’d switch too.
Regarding Microsoft it’s not as easy to switch as going on another website, OpenAI doesn’t have that ecosystem lock in.
> Yahoo has shown that even with immense brand recognition people will still switch if the alternative is really better.
But it didn’t, Google users beyond a few initial super users who switched early on in the late nineties/early two thousands, track directly with the massive growth in new active web users. These new first time web users, far more than switching made up the growth between 2002-2006 that made Google dominant over Yahoo. It also should be kept in mind how much better Google was over Yahoo, whereas I am doubtful LLMs will have such deviations in quality, looks more like the opposite.
Point remains, OpenAI will, in my opinion, retain the strongest consumer share of LLMs, regardless of output quality, introduction of ads, etc.
This is not ecosystem lock in, it is solely branding. What do you think most have in mind when you mention search? What when it comes to online shopping? Now do the same for “AI”. Only one brand comes to mind for most.
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.
And defaults matter - every browser that matters except for Edge defaults to Google as well as every mobile phone outside of China.
Both Google and Apple (ie any searches in Safari make money for Apple based on the Google deal) said there was no slowdown on Google searches and the “AI overview” by Google is “good enough”.
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.
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.
It's run by an insane person and insane people are generally very volatile and difficult to rely on.
I mean, even just the name - 'X'. You can tell that's some Elon Musk bullshit because it's the stupidest fucking name I've ever heard in my life and nobody with even a quarter of a brain would ever suggest that as a brand name.
When that's literally the brand of your company, naturally I question if everyone has the screws tightened up there, you know?
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.
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).
> 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.
Ads are not just a switch one can turn on. Firstly, you need to build a decent ad serving/targeting/pacing engine. Secondly (and more importantly) you need to hire a shed ton of sales people (in many, many geos) and then ramp them all up (difficult if you're building the product at the same time).
And then you need to keep at it for 3-5 years minimum before you'll finally get the bigger/more conservative brands/agencies/etc to buy in properly.
At that point, you'll make decent money, after accounting for all of the costs. I'm not sure that you'll make enough money, but it would definitely stanch their bleeding a little.
tl;dr if they haven't already built this ad product, it's unlikely to make a material difference before 2030.
Why should they give a fuck about the SEO industry? You think Google "nurtures" the SEO industry? They're selling ads to businesses and displaying them to consumers. SEO folks are just parasites in the system.
Yes of course Google nurtures the SEO industry. The first hit I get when I google SEO is a best practice site from Google themselves.
The person/department/agency that is responsible for doing SEO is the same one that is responsible for spending ad money on Google. It's in their best interest to internally sell "search" (no matter if organic/inorganic) as a good advertising channel and that creates great stickiness for Google's ad business.
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.
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.
How does one take a fraction of the world economy?
Microsoft sells services pretty much everywhere on earth and has a near-monopoly on PC OSes, enterprise email, productivity suites plus a giant cloud computing service....and their annual revenue last year was just $245 billion.
OAI can't get anywhere close to that, not least because they have multiple competitors and several large corporations (MSFT, Google, Meta) would rather dogfood their own solutions than use a rival's.
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.
