Consider the reverse. If AWS didn't have a large guaranteed customer in the form of Amazon, would they still be able to develop their products with perfect knowledge of the needs?

I don't have the answer but this question has an answer, as Amazon's earning reports are public.

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Don't give them ideas.

Just because people need a grocery store doesn't mean that you're guaranteed to make money running one.

multiplying huge revenue by a small percentage to get a big positive number

to multiplying huge revenue by a small negative percentage to get a big negative number

So that's how Kroger managed to lose billions over the last couple of quarters, or how small changes in shoplifting/shrinkage based on store makeup can cause losses to some chains, etc.

I actually don’t even think it’s a IaaS company. I mean it is, but Amazon seems to always excel at operations: whether it’s organizing a retail business, operating a logistics company, or managing a hyperscaler, it just seems like its real secret sauce is running ops.

(Which makes sense because all of their end user products suck)

50% of amazon operating profit is from AWS. NVIDIA's GPUs aren't really that much better than AMD if it weren't for CUDA.

Software company is a pretty good description for both.

youre right, i should say tech company. but at least my flawed epistemology reveals my humanity

although one could argue disingenuously that nvda is a software company because the product they ultimately manufacture is a bunch of blueprints they email to tsmc or samsung who then actually make the chips

Investor analyst looks at earnings growth and determines Customer Acquisition Cost (CAC) and Customer Acquisition Cost Payback Period (CACPP). They determine that ABC Software Corporation has no marginal manufacturing cost because it makes software that it sells online, so if it invested 90% of its profit margin into marketing it could grow its ARR by 140% a year. Then they extrapolate that for 30 years and say ok the NPV of 30 years of 140% ARR on current CAC, etc etc...

If everyone in the industry benchmarks on more or less the same multiples, it becomes a good idea to buy any b2b crud saas trading at 10x earnings because if the big boys see it they'll probably bid it up to 30x

the other classic move is to take a business which really isn't even a new technology, like revolut, and call it a tech business. now suddenly a bank can trade on a 50x earnings multiple instead of 15x like say a bank. many such cases~

we are only examining the valuation metrics here, not comparing the companies themselves as investments.

you could decide that if you are a very large company, building software internally to replace a SaaS product is a path forward. Or replacing a premium software like DocuSign with a cheap one like Zoho sign. or just building your own proprietary electronic signature app

It is however impractical for big company to start manufacturing cars or designing competitive GPUs

so the earnings of tesla and nvidia is theoretically more 'stable' than a software application company like salesforce, adobe, etc.

this analysis ignores both the size of the company, and what it does, or whether or not any one of them is a good investment

Yes, I would argue good (stable, fast, easy to use) software was somewhat of a moat and much harder before coding agents.

Stripe, Square, Shopify, Google, all thrived in some part because their services take a hard problem and make it easier to use. Now more people can take a hard problem and make it easier to use.

All you have to do is look around (esp 5+ years ago) and see the many many BAD, unstable, hard to use, slow, etc versions of these companies

Windows was a moat but it looks more like an anchor now.

We should just blame "the willies".

Investment is all about belief. When the root cause is the willies, then we hallucinate reasons together.

Crypto and memes have demonstrated us a lot about the drives of individual investors.

Unfortunately it seems that professional investors are not that much more rational (from my limited personal experience with a small hedge fund, and from my years of looking at markets).

My favourite term has always been "taking profits" which is generated by the technical analysis (I loath that term) of looking at the prices: taking an effect and publishing a cause (trying to sound smart).

We are deeply irrational beings; often the more you go up a professional ladder the more rationalisation you see.

During unstable periods, we see lots of weird side-effects and there is a lot that doesn't seem to make sense.

Edit: a better meme could be "The use of AI by funds is destabilising markets"

Disclaimer: I am not a professional investor. I am a cynic.

> Would you expect the collapse of the yen carry trade to cause the Dow to collapse as well?

USD devalued ~10% last year, so some of the losses are already priced into the DJI. When you account for that and sprinkle in ~3% inflation, it has lost value despite being up ~11% in the last year.

Back when the Internet was America online and some CGI bin perl scripts, there were a lot of very lofty things said about the potential of the Internet in the future. I don’t remember any of them predicting the power of the tech would have over business, politics, media, and hours of every single day for billions of people. Even without AGI, it’s quite possible that were still underestimating. The effects of predictive, probabilistic computing 20 or 50 years from now.

They were replying to this particular underestimation:

> AI is limited to probabilistic and annoying chatbots that are for entertainment and for looking up trivia questions.

That is not a rational assessment of the utility that the technology provides, even today.

I suppose people don’t realize how much of their day is actually engaging with Google through their trackers, their email, their phones, YouTube, etc.

By that exact logic Tiktok should be the most valuable company on the world, yet its not even in top 10. Attention doesn't automatically generate profit especially since most of these companies are yet to monetize attention. They are still burning billions and the public opinion on this outside of tech bubble is very negative. It wouldn't surprise me if the money on the internet falls to pre-2020 levels in next few years. Subscription pricing model is also becoming increasingly cumbersome for companies and individuals which is another worrying trend.

Yeah.... stick to conversations strictly re. technology pal.

There's literally a billion ChatGPT users already, the worlds fastest growing product. Do you think they're all just playing around in the sand? Ask anyone in education, it has completely upended every student's workflow.