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Apologies for the stream of consciousness. It's almost 3AM and I've been benchmarking LLMs for the past 8 hours:
Back when DeepSeek R1 came out, we saw the market react to the realization that a viable LLM doesn't need to be trained on the volume of cutting edge nVidia hardware you can only get on the white market. R1 was good. It wasn't the best, but it was a wake-up call for the west... that rhyme was not intentional...
Over the past few days, we saw 2 insane releases from Chinese labs.
Kimi, which was trained on a mix of nVidia and Chinese chips, crept up to Opus 4.8 territory.
And Qwen3.8, which came out Monday morning (Chinese time) and performs similarly to Kimi, and it was trained exclusively on domestic Chinese hardware -- proving nVidia's not even needed to train a SotA model.
Even domestically (in the US), Everyone and their mother has been working on training and inference ASICs and infra which will eventually displace nVidia hardware. Jensen's not dumb, so he's trying to keep nVidia in the conversation by continuing the trend of "acquisitions" (Groq), investments (Marvell), and partnerships (Intel), by now desperately squeezing itself onto the hype train of would-be competitors (d-Matrix). It's almost coming off desperate.
On top of the deterioration of nVidia's moat, add the fact that their stock price is based on the sales figures that came with reckless datacenter spending. Datacenter roll-outs are at a point, now, where we don't even need the hardware yet because we can't even power it for 5+ years! They've already saturated the grid where they *want* to build. We can't generate power fast enough, we can't run transmission lines fast enough, and residents are fed up with data center construction creeping up on their residential areas. There's just so much friction.
And my last point is, this shit isn't even profitable for the labs! The operational net losses of these labs is just... insane. They all hoarded nVidia's proverbial shovels and pickaxes early on as if they'd be the last one standing, but what happens when these labs begin to wind down? Are they going to be keeping up, buying overpriced nVidia chips at the current volume of their collective? Probably not. This is all just way too expensive to keep up. And increasingly, the public just ain't buying it.
</rant>
I can't fight the feeling that our favorite pickaxe salesman is losing his market, and I've been losing confidence that nVidia will have another Covid-era Crypto or AI moment to keep pace for the rest of the decade.
TL;DR: Chinese labs are now competitive using domestic hardware, and I think the practical market is much smaller and already saturated. Where are tomorrow's customers?
I *want* to be wrong, so by all means, tell me why I'm wrong lol