The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:20:19 · Harry Stebbings, Erik Bernhardsson
[00:20:19] S1: How do you do GPU buying in terms of forecasting then? Because you don't wanna have an insane excess of supply just sitting on your books. [00:20:27] S0: Totally. The GPU lead times right now is about three to four months. So we basically do a straight line or exponential line extrapolation, and we look at an aggregate across all our customers. We have a very diversified set of customers. You can actually look at the demand in aggregate pretty well and predict based on monthly growth rates, which have been about 30, 40% month to month for the last twelve months. And you just project that, you know, three to four months into the future, you end up with like two to 3x. You go out and, you know, buy that capacity and make sure to ramp up, and sometimes [00:20:54] S1: But can you just buy that capacity? [00:20:55] S0: You can. Yeah. I mean, I think there's a little bit of, like, a misconception that, we're out of capacity. I mean, NVIDIA is, like, shipping, like, an insane amount of GPUs, like, every month. I don't know how many 100,000 black holes are getting installed. Prices are up for sure. You have to pay more to get the same amount of GPUs. And I don't wanna say it's like an efficient market, but if you're willing to pay more than other people, you can get a lot of GPUs. [00:21:15] S1: Is there a price at which it doesn't make sense for you? Of course there is, but at what point
00:21:15 · Harry Stebbings, Erik Bernhardsson
[00:21:15] S1: Is there a price at which it doesn't make sense for you? Of course there is, but at what point [00:21:20] S0: I don't think so. I think, in fact, like, we're actually more long than we're short GPUs because we we can charge a higher price to our customers. Like, there's effectively a market price, and it's, like, different dynamics because we lock up longer term reservations and and rent them out on a slightly shorter duration. But, you know, if if the underlying price goes up, people are also willing to pay more. [00:21:36] S1: What happens to the price over time? H100s were meant to depreciate and Yeah, go I [00:21:41] S0: have no idea. Actually, it's funny. Well, dude, if [00:21:45] S1: you have no idea, what am I meant to have? [00:21:48] S0: Did you see Jensen yesterday? He was in London, actually. Asked him this question. He's like, well, obviously, like, supply is gonna catch up with demand eventually, and then we'll see what happens with pricing. It might happen in a year. It might happen within five years. He said exactly the same thing I always tell people. Like, gravity. Hardware prices always go down in the very long run. Right now, we're in a very... You know, there... There's a supply shortage, and, you know, that means that the prices have gone up. They may continue to go up for another year, two years, five years. I don't know. But eventually, they will come down.
00:21:48 · Erik Bernhardsson, Harry Stebbings
[00:21:48] S0: Did you see Jensen yesterday? He was in London, actually. Asked him this question. He's like, well, obviously, like, supply is gonna catch up with demand eventually, and then we'll see what happens with pricing. It might happen in a year. It might happen within five years. He said exactly the same thing I always tell people. Like, gravity. Hardware prices always go down in the very long run. Right now, we're in a very... You know, there... There's a supply shortage, and, you know, that means that the prices have gone up. They may continue to go up for another year, two years, five years. I don't know. But eventually, they will come down. [00:22:15] S1: How early are we? Because I, you know, I run Instinct for everything. I have over a 100 automations on Instinct doing things that are just absolutely wild, from buying concert tickets to planning shows to helping with medication for my mother. The amount of compute I am using is Jevons paradox times a 100. Yeah. If that is equivalent for actually many people in society Yeah. Because it's accessible within WhatsApp and what... How early are we there?
00:22:15 · Harry Stebbings, Erik Bernhardsson
[00:22:15] S1: How early are we? Because I, you know, I run Instinct for everything. I have over a 100 automations on Instinct doing things that are just absolutely wild, from buying concert tickets to planning shows to helping with medication for my mother. The amount of compute I am using is Jevons paradox times a 100. Yeah. If that is equivalent for actually many people in society Yeah. Because it's accessible within WhatsApp and what... How early are we there? [00:22:41] S0: I think we're very early. It's... I think you're saying the same thing. I mean, yeah, Jevons power, whatever. Like, I think there's just so much latent demand for these things. And, you know, I I think, you know, eventually we're gonna start to run up against these capital constraints. Right? Like, there's rates that are going up. Like, we just can't build data centers fast enough. Maybe that's good. I don't Like I think in a way, like, you know, it's a guarantee against like overbuild, which... But I also don't know if we can overbuild these things. There's just so much demand for it. [00:23:06] S1: I don't think you can overbuild in the next five years. Probably not.
00:23:06 · Harry Stebbings, Erik Bernhardsson
[00:23:06] S1: I don't think you can overbuild in the next five years. Probably not. [00:23:09] S0: No. I think what could happen is like people realize, Instinct is a good example. Like, allegedly, they don't charge or they don't make revenue yet. So I think it's a good example. But, like, clearly Instinct can make a ton of money in the future. But so, you know, that's a dynamic in the market. There's a lot of companies that are not yet making money yet, and they're using a lot of GPUs. They just have to eventually start to make money. But, like, that that lag could take a while. Right? And and that... We might run up against that. [00:23:34] S1: You mentioned the specialization that comes within the inference market, and we we spoke about NVIDIA there. We're seeing more and more specialization within the chip market. Is NVIDIA's business today stronger than ever or actually weaker than ever as you see the fragmentation of the market into very specialized players from Cerebras to Etched to OLX to Fractile that weren't there before? [00:23:55] S0: I think you're... Try to phrase it as, like, one versus the other. My my view is, like... I think Erik Visher was actually... It's funny. Like, it's the same thing. Like, all of these things are gonna grow. Like, I think NVIDIA is gonna keep growing. They're gonna keep shipping amazing chips. I think there's also gonna be, like, Cerebras and all these etched and all these other ones, like, shipping specialized chips, and they're also gonna grow. So I I think there's gonna be markets for all of it.
00:23:55 · Erik Bernhardsson, Harry Stebbings
[00:23:55] S0: I think you're... Try to phrase it as, like, one versus the other. My my view is, like... I think Erik Visher was actually... It's funny. Like, it's the same thing. Like, all of these things are gonna grow. Like, I think NVIDIA is gonna keep growing. They're gonna keep shipping amazing chips. I think there's also gonna be, like, Cerebras and all these etched and all these other ones, like, shipping specialized chips, and they're also gonna grow. So I I think there's gonna be markets for all of it. [00:24:16] S1: So why is Cerebras down 30%? I don't know. [00:24:18] S0: I don't follow, really, the stock market. [00:24:20] S1: You don't follow the stock market? [00:24:21] S0: No. I I mean, like, a very passive, you know, buy the index, mostly because of my own time. Like, I don't feel like I have the energy to follow the stock market. [00:24:28] S1: To what extent is CUDA the moat that everyone says it is for NVIDIA?