After GPT-3, is Nvidia undervalued?
GPT-3 made me update considerably on various beliefs related to AI: it is a piece of evidence for the connectionist thesis, and I think one large enough that we should all be paying attention.
There are 3 clear exponentials trends coming together: Moore's law, the AI compute/$ budget, and algorithm efficiency. Due to these trends and the performance of GPT-3, I believe it is likely humanity will develop transformative AI in the 2020s.
The trends also imply a fastly rising amount of investments into compute, especially if compounded with the positive economic effects of transformative AI such as much faster GDP growth.
In the spirit of using rationality to succeded in life, I start wondering if there is a "Bitcoin-sized" return potential currently untapped in the markets. And I think there is.
As of today, the company that stands to reap the most benefits from this rising investment in compute is Nvidia. I say that because from a cursory look at the deep learning accelerators markets, none of the startups, such as Groq, Graphcore, Cerebras has a product that has clear enough advantages over their GPUs (which are now almost deep learning ASICs anyway).
There has been a lot of debate on the efficient market hypothesis in the community lately, but in this case, it isn't even necessary: Nvidia stock could be underpriced because very few people have realized/believe that the connectionist thesis is true and that enough compute, data and the right algorithm can bring transformative AI and then eventually AGI. Heck, most people, and even smart ones, still believe that human intelligence is somewhat magical and that computers will never be able to __ . In this sense, the rationalist community could have an important mental makeup and knowledge advantage, considering we have been thinking about AI/AGI for a long time, over the rest of the market.
As it stands today, Nvidia is valued at 260 billion dollars. It may appear massively overvalued considering current revenues and income, but the impacts of transformative AI are in the trillions or tens of trillions of dollars, http://mason.gmu.edu/~rhanson/aigrow.pdf, and well the impact of super-human AGI are difficult to measure. If Nvidia can keeps its moats (the CUDA stack, the cutting-edge performance, the invested sunk human capital of tens of thousands of machine learning engineers), they will likely have trillions dollars revenue in 10-15 years (and a multi-trillion $ market cap) or even more if the world GDP starts growing at 30-40% a year.
For similar reasons, I allocate a small portion of my portfolio toward assets (including Nvidia) that might appreciate rapidly during slow takeoff, in the thinking that there might be some slow takeoff scenarios in which the extra resources prove helpful. My main reservation is Paul Christiano's argument that investment/divestment has more-than-symbolic effects.
Seems it was a good call.