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.
