this post was submitted on 06 Sep 2024
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Genuinely curious, how do you know where the valuation, any valuation, come from?
This is an interesting story, and it might be factually true, but as far as I know unless someone has actually asked the biggest investor WHY they did bet on a stock, nobody why a valuation is what it is. We might have guesses, and they might even be correct, but they also change.
I mentioned it few times here before but my bet is yes, what you did mention BUT also because the same investors do not know where else do put their money yet and thus simply can't jump boats. They are stuck there and it might again be become they initially though the demand was high with nobody else could fulfill it, but I believe that's not correct anymore.
Why do you believe that? As far as I understand, other HW exists...but no SW to run on it...
Right, and I mentioned CUDA earlier as one of the reason of their success, so it's definitely something important. Clients might be interested in e.g Google TPU, startups like Etched, Tenstorrent, Groq, Cerebras Systems or heck even design their own but are probably limited by their current stack relying on CUDA. I imagine though that if backlog do keep on existing there will be abstraction libraries, at least for the most popular ones e.g TensorFlow, JAX or PyTorch, simply because the cost of waiting is too high.
Anyway what I meant isn't about hardware or software but rather ROI, namely when Goldman Sachs and others issue analyst report saying that the promise itself isn't up to par with actual usage for paying customers.
Those reports might effect investments from the smaller players, but the big names(Google, Microsoft, Meta, etc.) are locked in a race to the finish line. So their investments will continue until one of them reaches the goal...[insert sunk cost fallacy here]...and I think we're at least 1-2 years from there.
Edit: posted too soon
Well, I'm no stockologist, but I believe when your company has a perpetual sales backlog with a 15-year head start on your competition, that should lead to a pretty high valuation.
I'm also no stockologist and I agree but I that's not my point. The stock should be high but that might already have been factored in, namely this is not a new situation, so theoretically that's been priced in since investors have understood it. My point anyway isn't about the price itself but rather the narrative (or reason, as the example you mention on backlog and lack of competition) that investors themselves believe.