In good times, profit margins are impossibly high. Nvidia, perhaps the world’s most advanced designer of AI chips, last year made $20 billion of gross profit on $30 billion of sales.
It then goes on to detail a reversal in that profit trend which has since gone away (it’s a 2022 article). Nvidia is making huge fat profits again, since everyone has quadrupled down on AI.
Right, key part is that there needs to be constant massive demand for the whole thing to be profitable. AI hype will die down eventually, so that’s not gonna be a sustainable long term cash cow for them.
“Won’t you feel for the poor money-gouging GPU manufacturers?”
Yes, chips are expensive. But the profit margins of companies like Nvidia are growing much faster than the cost of silicon.
Last I looked at this, profit margins in chip industry are pretty thin. Profitability comes mostly from volume. This article gives a pretty good overview of the dynamics in the industry https://compactmag.com/article/fighting-a-chip-war-on-the-cheap
From that same article:
It then goes on to detail a reversal in that profit trend which has since gone away (it’s a 2022 article). Nvidia is making huge fat profits again, since everyone has quadrupled down on AI.
Right, key part is that there needs to be constant massive demand for the whole thing to be profitable. AI hype will die down eventually, so that’s not gonna be a sustainable long term cash cow for them.