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I've been calling a crash for far too long so take with a pinch of salt BUT I think another four years of this is very unlikely.

1996 - Cisco was 23.4B or 0.3% of US GDP

2000 - Cisco peaked at 536B or 5.2% of US GDP

2020 - Nvidia was 144B or 0.7% of US GDP

2024 - Nvidia is 3.4T or 11.9% of US GDP

Numbers very rough and from different sources, but I'd be surprised if Nvidia doesn't pop within 1-2 years at most.

3 comments

Comparing a company’s market cap to the US GDP makes no sense to me. The former is the product of shares and stock price. The latter is total financial output of a country. What intuition is that supposed to provide?

Comparing to total household wealth would be better (about $140T now, about $40T in 2000)

Rumor is that there just isn't enough power to turn on all those fancy AI accelerators or Datacenters.

There's a reason Microsoft just outright purchased the entire output of 3-mile island (a full sized nuclear power plant).

At some point, people will stop buying GPUs because we've simply run out of power.

My only hope is that we don't suffer some kind of ill effect (ex: double the cost of consumer electricity or something, or local municipalities going bankrupt due to rising energy costs). The AI boom has so much money in it we need to account for tail wags dog effects.

In a working market, we won't run out of power, but power becomes so expensive that it's no longer viable to use most of the GPUs. The boom shifts to power generation instead, and we will have a similar article "The power investment boom", where people will debate that we will stop building power plants because we've simply run out of GPUs to use that power.

Fortunately we're also electrifying transportation so there will be no shortage of demand for electrical power generation.

This comparison is silly. First of all, Cisco's scale was assembled through acquisitions, and hardware is a commodity business. Nvidia has largely grown organically and has CUDA software as a unique differentiator.

More importantly, Cisco's margins and PE were much higher than Nvidia's today.

You should use actual financial measures and not GDP national accounts which have zero bearing on business valuation.

I don't think GP's comparison is as silly as you think. People thinking about "money" take many different numbers, from a shitload of source, into account.

There's a relation between P/E and future actual revenues of a company.

Imagine that a similar comparison would imply that it's projected that in a few years NVidia's revenues shall represent 10% of the US's GDP: do we really believe that's going to happen?

The Mag 7 + Broadcom have a market cap that is now 60% of the US's GDP. I know you think it's silly but... Doesn't that say something about the expect revenues of these companies in a few years?

Do we really think the Mag 7 + Broadcom (just an example) are really to represent the % of the actual US's GDP that that implies?

Just to be clear: I'm not saying it implies the percentage of the US GDP of these 8 companies alone is going to be 60% but there is a relation between the P/E of a company and its expected revenues. And revenues of companies do participate in the GDP computation.

I don't think it's as silly as several here think.

I also don't think GP should be downvoted: if we disagree, we can discuss it.