Should I stay or should I go (NVIDIA)?

As the saying goes, “Markets can remain irrational longer than you can remain solvent”.

I saw this chart recently, comparing the historic stock price of Cisco vs NVIDIA. It made me think about selling my NVIDIA position that has almost tripled at this point.

Qualitatively, the stock is a strong sell. However the company doesn’t have a lot of competition and has been the structural necessity for the recent (and insane) AI wave.

At a recent VC breakfast NVIDIA was the subject of debate between some bulls and bears. The former thought that large language model demand will be insatiable. In fact we will soon run out of both compute and underlying supply of electricity.

The bears’ point was the NVIDIA’s demand is contracted but not yet deployed. Also, with the stock market uncertainty, there is a fight to the magnificent 7. A few stocks with a gravitational pull of a black whole.

This debase is close to the heart, as a startup recently reached out, asking me to run sales. The core value proposition is to make it cheaper to train, fine tune and deploy LLMs. Their optimistic take is a continued demand for LLMs in the short term, and a shift to high costs, to fine tune and deploy medium sized language models in the medium term.

This startup has just raised an obscene seed round, on small revenue, in line with the frothiness of the AI space.

My bet is on the commoditization of the LLMs as open source model quality catches up. I also don’t think that NVIDIA will be able to sustain this pricing power. I believe in reversion to the mean, a la Cisco’s stock price on this chart.

In other news, Cisco laid of 4000 people today.

It’s a rough go in tech out there.

Yuri