can someone explain why nVidia doesn't just hold their own AI? And literally devote 50% of their production to their own compute center? In an age where even ancient companies like Cisco are getting in the AI race, why wouldn't the people with the keys to the kingdom get involved?
They've been very happy selling shovels at a steep margin to literally endless customers.
The reason is because they instantly get a risk free guaranteed VERY healthy margin on every card they sell, and there's endless customers lined up for them.
If they kept the cards, they give up the opportunity to make those margins, and instead take the risk that they'll develop a money generating service (that makes more money then selling the cards).
This way there's no risk of: A competitor out competing them, not successfully developing a profitable product, "the ai bubble popping", stagnating development, etc.
There's also the advantage that this capital has allowed them to buy up most of TSMC's production capacity, which limits the competitors like Google's TPUs.
Because history has shown that the money is in selling the picks and shovels, not operating the mine. (At least for now. There very well may come a point later on when operating the mine makes more sense, but not until it's clear where the most profitable spot will be)
Don’t stretch that analogy too far. It was applicable to gold rushes, which were low hanging fruit where any idiot could dig a hole and find gold.
Historically, once the easy to find gold was all gone it was the people who owned the deep gold mines and had the capital to exploit them who became wealthy.
1. the real keys to the kingdom are held by TSMC whose fab capacity rules the advanced chips we all get, from NVIDIA to Apple to AMD to even Intel these days.
2. the old advice is to sell shovels during a gold rush
