Platformonomics TGIF is a weekly roll-up of links, comments on those links, and perhaps a little too much tugging on my favorite threads.
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Another quiet week!
News
The Bank of NVIDIA, Hardball and Software
Perhaps you’ve heard the Jensen Huang news.
Ben Thompson bucketed reactions (prior to Jensen’s actual resignation) by spiritual place of residence and overarching concerns: Washington DC (espionage and export controls), New York (return on equity and corporate governance), and Silicon Valley (pedal-to-the-metal on AI with Jensen the lead leadfoot).
NVIDIA is the heart of the “circular” AI trade, investing hundreds of billion in its customers who then buy NVIDIA hardware. By maximizing the number of neoclouds and neolabs, NVIDIA was trying to minimize the risk of specific customers gaining purchasing power. Yet NVIDIA harbored other risks.
I called NVIDIA “the central bank of AI” for that investment strategy. It is the lender of last resort, and the only lender to companies who can’t afford NVIDIA’s hardware.
Bethany McLean (the reporter who broke the Enron fraud) last week published a comprehensive inventory of NVDIA’s investments and guarantees (with a quote from me explaining why Wall Street is delusional to think a tech company is going to just hand windfall profits to shareholders). The article tees up the obvious question of what might cause a run on the bank of NVIDIA.
In another timely piece on the eve of Jensen’s implosion, The Information outlined how NVIDIA has played hardball with policy-makers over export controls and silenced its customers. Bill Bishop made a similar point on Space Twitter:
The knives are out not just for NVIDIA, but the battle is on between our spiritual city states. Silicon Valley sought to save Jensen’s job by pleading for a shareholder plebiscite akin to TV talent show voting in lieu of board governance. The first class action lawsuit has been filed, but not the last. And everyone in Washington DC wants a piece of NVIDIA, while everyone involved lawyers up.
I’ll inject the concerns of a fourth spiritual city state into the discussion: Seattle, a provincial software town.
NVIDIA creates a lot of software. Beyond CUDA, the as-yet-irreplaceable GPU programming model, the vast majority of NVIDIA software is somewhere between mediocre and irrelevant. But they persist in the dream of vertically integrating the entire AI stack!
I am reminded of Intel in the late 20th century. Another chip company so awash in cash they felt compelled to dabble in software. Lots of software. Not necessarily good software (in fact overwhelmingly not). Vanity projects. Rarely production quality. Research released. Every new buzzword’s cookie was licked. But customers who wanted Intel chips were urged to take that software.
NVIDIA today goes further than Intel. The NVIDIA-funded neos not only have to buy NVIDIA’s hardware (which they do gladly), but also must support NVIDIA software (much more reluctantly). This has downstream effects for an entire industry which finds itself forced to build around some random NVIDIA researcher’s pet project.
There are concerns Jensen’s departure will undermine both NVIDIA’s and the broader industry’s commitment to open weight and open source models. NVIDIA’s efforts here are (characteristically) underwhelming, even as Jensen has been a forceful advocate for open models. But between Jensen’s Sinophilia and the overall diminishment of NVIDIA’s ability to dictate the entire stack, open models will need a new champion.
OH: “Reflection sees itself in Poolside”
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Jensen on Management
Some fodder for a heterodox management book:
WSJ: Huang, who has roughly 60 direct reports, has said he doesn’t believe in succession planning and that leaders should continuously pass on knowledge and information as they have it. It wasn’t immediately clear who would succeed him.
“immediately?”
WSJ: Huang ran a relatively flat organization, with about 60 direct reports
“relatively?”
It will take that long for the new interim CEO to meet with Jensen’s direct reports…
Private Equity in Action: WPEngine Abetting Russian Censorship
Silver Lake-owned hosting roll-up WPEngine helping the Russians. Usually they work with the Saudis.
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Private Equity in Action: Apollo (and Elon), Private Equity in Action: Time to Rebrand the Asset Class?, Private Equity in Action: Foursquare, Private Equity in Action: Xbox, Private Equity in Action: Seeking a Government Bailout, Perfidious Private Equity, Software Migration Alerts for Private Equity Owned Companies, Private Equity in Action: “We’re ‘AI Winners’, Really”, Private Equity in Action: You Can’t Spell Extraction without AI, Private Equity in Action: Medallia, Private Equity in Action: Come for the Subpar Returns, Stay for the Illiquidity v2, Private Equity in Action: Come for the Subpar Returns, Stay for the Illiquidity, Private Equity in Action: From Famed to Fraught, Private Equity in Action: I’m Lovin’ It, Private Equity in Action: Narrative Collapse?, Private Equity in Action: The Great Garage Door Service Wars, Private Equity in Action: Having to Show Their Math is New Experience, Private Equity in Action: Underperforming, Perfidious Private Equity
Quick(er) Hits
NYT: The sudden demise, after Tesla sunk about $2 billion into development and production, led many people to compare Cybertruck to the ultimate business-school example of a flop, the Ford Edsel. But that’s really not fair. The Edsel sold far more vehicles.
When Congressional Select Committee for the Tik Tok Travesty? A great way to both accommodate legislators’ priority to make Tik Tok clips and revisit the rule of law along the way!
NEO – NVIDIA Equity Obligation?