"If you look at the valuations for all these AI names, they just can't all be accurate. You have memory makers at 3-5X PE. You have NVIDIA at a really low PE."
~ @GavinSBaker Managing Partner & CIO of Atreides ($11B AUM).
Nvidia, memory, custom chips, optical networking, power equipment, cooling systems and data center builders are all being treated as winners of the same spending boom.
But each bucket is pricing a different version of the boom.
There is Cross-sectionally inefficiency, i.e. the market is not ranking related AI companies consistently, because one group implies massive data center growth while another group implies slower or riskier growth.
A boom does not automatically make every supplier a compounder, because the profit pool moves toward whatever is hardest to substitute, hardest to delay, and hardest for customers to bargain down.
If the scarce thing is electricity, cooling, and physical capacity, then infrastructure suppliers should command the premium.
If the scarce thing is still accelerated compute, then Nvidia and memory are probably too cheap relative to the rest of the chain.
The ASIC narrative adds another layer of fog.
Broadcom can be growing fast in custom chips and still not be taking the most valuable parts of Nvidia’s growth.
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From " All-In Podcast" YouTube channel, (link in comment)
