Hey guys, it's Sasha. In the first five months of 2023, Nvidia stock has gone up 180, becoming only the ninth company in the world to reach a valuation of one trillion dollars. Six months ago, Nvidia had a PE ratio of 57 which placed it in the pretty expensive valuation category. but this has now gone straight to the top of the meme charts with a PE of 209.

As I'm recording this video and there are two reasons for this meteoric rise. The first reason is AI a Nvidia is at the Forefront of producing computer chips that are used in building and training artificial intelligence models that are particularly popular right now. and in their last quarterly report in a video guided for Q2 revenue of 11 billion dollars which is 53 more than their revenue was in Q1 and 64 higher than their revenue was in the same quarter last year, the reason for the Sudden Rush of Revenue is the world's latest incarnation of the thing that will disrupt everything and put us all out of our jobs overnight. Because exactly six months ago, Open AI released Chat GPT the first language model that didn't kinda suck and the first one that anyone had actually heard of.

And suddenly the world went bananas because you could ask this thing questions and it would give you answers and people immediately concluded that AI is now approximately at the level of Skynet. Come with me if you want to live. Every single job in the world is about to be replaced by cyborgs and we're probably all doomed. But just before Skynet declares war and completely wipes out Humanity You might as well make a boatload of money by investing in any stock that is in any way tangentially vaguely related to Ai And Nvidia is the most obvious one because they make these forty thousand dollar H100 chips that AI companies use to train their language models.

If you actually read the Nvidia Q1 results, you will notice that the rest of the business is actually doing pretty badly. The gaming business revenue is down 38 from a year ago because of macroeconomic and conditions because buying an Nvidia graphics card these days requires you to remortgage your house and the professional visualization part of the business is down 53 percent year on year. This is the sort of stuff that I use for making and editing my videos, but it's the data center part of Nvidia that is raking in the cash, earning 4.28 billion dollars in Revenue up 14 year on year and about 60 percent of Nvidia's total revenue. And just to make sure that you understand how important AI is to Nvidia Their short press release mentions AI 15 times just to remind you the pace of technology is accelerating fast.

First, the amazing technology behind crypto tokens completely revolutionized. Finance Nobody deals with banks anymore as every Finance expert on YouTube predicted, we have now completely moved away from using dollars and we buy our food and pay for our bills with Flocky Inu and safe Moon which are 100 definitely here to stay as the stable, robust currencies of the future. Then technology accelerated even more through 2021 and into 2022 and the smart money went into buying Jpegs of monkeys wearing funny hats for three hundred thousand dollars. This, of course, was completely revolutionary, completely transformed the art world and replaced every single ownership Ledger and register in the world.

And now that the Trump investors have lost all of their money twice Along Comes Ai And now instead of choosing a picture of a monkey wearing a funny hat, you get to choose a company that has any sort of relevance or exposure to AI instead Microsoft in our pretty much own open AI are up 38 so far this year. As a result, Google quickly made their own version of chat GPT which apparently sucks. so they are going to the Moon up 39 so far this year. AMD Don't even make graphics cards, not the ones that anyone uses for AI They've had three pretty bad quarters in a row and have pretty much no exposure at all to AI but they are a computer chip company and that's good enough because that makes them kind of like Nvidia so they go up 96.

Palantius had a world record and the number of times that they mentioned the word AI in their earnings call. and although the stock market is still not sure what it is, the Palantir does. It sounds like whatever it is that they do has something to do with AI. The company's growth rate continues to decline every single quarter, but Kaboom 125 up so far this year.

and if you're not quite sure which company to bet on, you might as well go for the one that has AI in the actual name. If you look at their home page, you can see that they mention AI as many times as possible, which is a commendable effort. and they get rewarded with the stock going up 297 in five months. In the Silicon, You might look at all of this and think that it looks suspiciously like a bubble.

Companies that only have a tangential relationship to AI are also blowing up. Amazon who have AWS is up 42 so far this year, Apple pole is up 42 as well, Tesla is up 86 and Facebook is up a hundred and ten percent because everyone's forgotten the Zuca Burgers busy making Nintendo Wii characters instead of his job. And it's funny because the companies that I just showed you make up about 28 of the S P 500. And if you do the math, these eight companies have pushed a whole of the S P 500 up by 17.4 percent this year.

But the S P 500 overall is only up 10 so far this year. So that means that the other 496 companies yes, there are more than 500 companies in the S P 500. The other 496 companies have lost 7.4 percent for the index overall. So while the entire Market has sold off because of recession fees, interest rates going up, consumer confidence declining GDP Growth slowing.

you know reasonable factors. Any company that paints itself in AI colors and waves the AI flag is booming against all the odds and the question is is this the start of a huge Revolution where everything we do is going to change immediately because of AI because if you go on Twitter that is kind of like what you get told is Amazon's p ratio of 293 or Nvidia's P ratio of 209 Justified because if these will be the leaders of this imminent completely unique AI Revolution Because everyone is treating AI like it's something brand new. a magic technology that came out of The Ether Mysteriously, six months ago, nobody knew it existed and it just turned out. But the truth is AI has already been making a huge amount of progress in the tools that you use every day.

It just wasn't something that was sexy, popular, or prominent. But chat GPT has now turned up. And the dimwits on Twitter Who used to tell you that you can become a gazillionaire by investing in crypto and then telling you that you can become stupid Rich from investing in Nfts and how all over Twitter Telling you that you can get stupid Rich through following these simple steps through AI Suddenly everyone is talking about it, but perceptions of what AI is and what it is not appear to be incredibly warped. GPT stands for a generative, pre-trained Transformer which is a type of a large language model.

These models are trained on vast amounts of data scraped from all over the Internet to build a neural network with hundreds of billions of parameters. The only function that these models have is to spit out the most likely sequence of words or whatever other form of output in response to a query. Because this model has read so much content online has so much information. If you ask it a basic question that has been answered many times before or one that has similar questions that have been answered many times before, it will give you the correct answer because it can structure the most likely sequence of words as the answer based on its learning data.

But there appears to be a wave of enthusiasm about AI which thinks that these models are more than what they are, that they are some kind of sentient beings, actual artificial intelligence things that can suddenly start thinking for themselves and begin building robots to kill people or whatever it is that people seem to think that these things aren't Although it sounds like a lot of fun, this is not the stage that we're at so far. A few weeks ago, Noam Chomsky wrote an article on GPT in the New York Times called The False Promise of Chat Gbt which provides a good summary of this point. Open Ai's Chat Gbt, Google's Bird and Microsoft Sydney are marvels of machine learning. Roughly speaking, they take huge amounts of data, search for patterns in it, and become increasingly proficient at generating statistically probable outputs such as seemingly human-like language and thought.

These programs have been hailed as the first glimmers on the horizon of artificial general intelligence that long prophesized moment when mechanical Minds surpass human brains not only quantitatively in terms of processing speed and memory size, but also qualitatively in terms of intellectual Insight artistic creativity, and every other distinctively human faculty that day may come, but its Dawn is not yet breaking, contrary to what can be read in hyperbolic headlines and reckoned by in judicious Investments The human mind is not like Cha Gbt and its ilk, a lumbering statistical engine for pattern matching, gorging on hundreds of terabytes of data, and extrapolating the most likely conversational response or most probable answer to a scientific question. The Crux of machine learning is description and prediction. It does not posit any causal mechanisms of physical laws. You should really go and read this whole article.

I'm going to put a link in the description below, but the gap between a predictive language model, an actual comprehension and intelligence is vast, and at some point in the future we will probably get there. but the wave of euphoria at the moment among investors at Nai seems to put that point a lot sooner than it is likely to come in. April News broke that Twitter is apparently building their own AI platform and have bought 10 000 Gpus to do it. Now if Twitter bought all of those Gpus from Nvidia and they were all the most expensive brand new H100 chips that have just come out, that's about forty thousand dollars a piece and that sounds incredible.

So 10 000 of them is 400 million dollars and there's Google and Microsoft and Facebook and Apple. Maybe 10 of these big companies are going to go and spend 400 million dollars each in Q2 and Nvidia's revenue is going to balloon because it is increasing by about 4 billion dollars. The question really is how many more companies are then going to spend that sort of money again in Q3, How many big companies are left that are able to spend 400 million dollars in Q3 and then in Q4 and then in every quarter after that? If the likes of Google Microsoft open Ai and others drop hundreds of millions of dollars on these AI projects object, what will be the incentive for small players who don't have hundreds of millions of dollars to burn? Will they go and build their own inferior models? Or will they just use the models already developed by the big guys? There is an accepted new paradigm that every single thing that every small business is doing right now will be replaced or have to involve AI in the future. And while AI can certainly help in many work streams, the level of euphoria from all the AI predictions seems to have a very limited understanding of what the world out there actually looks like and that it is actually far bigger and far broader than what you see in Silicon Valley because sometimes when you're holding a hammer, everything looks like a nail Nvidia and other companies might do very well out of selling picks to the people going up the mountain in search of AI but we are yet to see the commercial implications of AI on the bottom line.

So far, every company implementing AI is actively losing money on doing it, training, and operating these AI models is a heck of a lot more expensive than running an index, and Google is now beginning to show AI generated results at the top of search pages that tell you that you should cook an egg for 60 minutes. As it stands, this is going to significantly increase the cost of running search, which will affect the bottom line and reduce ad Revenue because Google is now not sure where to stick Those ads and it's pushing them further down the page. But even if Nvidia starts raking in 11 billion dollars that they are projecting next quarter, every single quarter, their valuation today is still sitting at 23 times those future sales and 51 forward. PE This assumes that the sales of chips for AI models have to grow by orders of magnitude from the numbers that they are forecasting for next quarter just to meet this valuation.

And as the technology evolves and competition increases, the price of these chips will reduce because that's what happens with tech now. Maybe I am a dinosaur and I just completely don't get it. I Am sure that the comments section is going to be full of people telling me exactly that. I look forward to reading those just like I didn't get the crypto boom when every idiot on Twitter and YouTube was telling you to buy flocky Inu just like I completely missed out on buying a monkey wearing a funny hat when everyone was selling the latest Nft scam.

It was the hottest thing in town. And I am not leveling AI with crypto or with stupid Nft scams. AI is 100 here to stay. It is a great technology.

It will change the world for the better. It will increase productivity I Have zero doubts about that. but just because that is the case does not mean that the company is playing the AI card right now necessarily make for good. Investments When their share price becomes completely removed from the business fundamentals or from any numbers that the companies are posting, the the AI craze that we're seeing unfold smells a heck of a lot like the.com bubble when any company with a website could be worth billions of dollars even if there was no commercials at all supporting that valuation.

because it's the future bro. and I'm sure there are going to be some people who will make a lot of money out of this big pump. I am certainly benefiting myself from being invested in companies that have seen a big increase in their share price for no particular reason. but it's important to be aware of why your Investments are going up and not pat yourself on the back too early because the problem with dumbass bubbles is that what goes up tends to come really hard bagged down.