205: Double-Dose of Nvidia (Q3 Earnings & Jensen Huang Interview), John Malone Interview, Good Guy FTC, Nuclear Protests, Habanero Sauce, and Dune (again, I know)
"as if millions of customer-retention call center voices suddenly cried out"
I’m slowing down the tune
I never liked it fast
You want to get there soon
I want to get there last
…
I’m lacing up my shoe
But I don’t want to run
I’ll get here when I do
Don’t need no starting gun
…
I always liked it slow
I never liked it fast
With you it’s got to go
With me it’s got to last
—Leonard Cohen,Slow
🌶 I recently tried the Secret Aardvark Habanero sauce for the first time, thanks to a recommendation from Simon Erickson.
Over a few days, I’ve gone through about 1/3 of it… I guess it’s a sign I like it!
Too bad it’s kind of expensive, at least compared to my staple of Huy Fong Sriracha. I wish they made much bigger containers (28oz?) at a lower price/oz…
🧠 It's hard to keep your mind’s aperture open to all frequencies and in all directions at the same time...
If you’re preoccupied with X, you may easily miss some important Y right under your nose.
It’s great to be focused, to spend as much time as possible in a flow state. But once in a while, come up for air and look around.
⛏ 🧱 Friend-of-the-show Ed Borgato posted about Minecraft:
Microsoft bought Minecraft for $2.5B in 2014, which is less - by almost half - than one quarterly dividend today. Minecraft has 140 million MAUs; $RBLX, valued at $70B, has 47 million.
It made me think about how much mindshare Minecraft has in my 7yo’s head.
He’s watched countless hours of Minecraft players on Youtube, and now has an encyclopedic knowledge of the game and all its tactics and mods…
Watching these videos is one of the ways he became bilingual 8 years younger than I did (well, that, plus Netflix shows and Zelda Breath of the Wild gameplay videos, mostly).
A big social benefits of these big franchises (games or films/TV, like Star Wars or Spiderman or whatever) is that they're "social networks" for kids.
You meet someone on the playground.. "You like Minecraft? Zelda? Spiderman? Star Wars?" and then you have something in common to bond over. Many adults get that from sports (“how about those <insert local sports team>?”).
🦾 🤖 Someday on earnings calls, AI analysts will ask questions, and AI executives will answer.
And Jensen's mini-me avatar will hosts Nvidia earning calls...
💚 🥃 For the price of one alcoholic drink, you get 12 emails per month (plus 𝕤𝕡𝕖𝕔𝕚𝕒𝕝 𝕖𝕕𝕚𝕥𝕚𝕠𝕟𝕤) full of eclectic ideas and investing/tech analysis. That’s 77¢ per edition.
If you make just one good investment decision per year because of something you learn here (or avoid one bad decision — don’t forget preventing negatives!), it'll pay for multiple years of subscriptions (or multiple lifetimes).
As Bezos would say of Prime, you’d be downright irresponsible not to be a member, it takes 19 seconds (3 secs on mobile with Apple/Google Pay — if you don’t see paid options, it’s because you’re not logged into your Substack account):
Investing & Business
🔥 Nvidia Q3 Highlights 🔥
Revenue of $7.10 billion, +50%
Data Center revenue of $2.94 billion, +55%
Gaming revenue of $3.22 billion, +42%
Gross margin +260bps YoY (+150bps non-GAAP)
Even pro-viz and auto segments doing better:
Professional Visualization: Revenue +144% from a year earlier and +11% from the previous quarter.
Automotive: Revenue +8% from a year earlier and -11% from the previous quarter (mostly because of OEMs cutting units on supply-chain problems).
And all this *has* to be while still being supply-constrained on at least some lines, despite the excellent work they did securing a lot of foundry supply from both Samsung and TSMC.
Some highlights from the call:
Last week, we announced general availability of Omniverse Enterprise, a platform for simulating physically accurate 3D world and digital trends. Initial market reception to Omniverse has been incredible.
Professionals at over 700 companies are evaluating the platform, including BMW, Ericsson, Lockheed Martin and Sony Pictures. More than 70,000 individual creators have downloaded Omniverse since the open beta launch in December.
There are approximately 40 million 3D designers in the global market.
40 million… That’s a higher number than I would’ve guessed. 🤔
While the data-center segment grew 55% overall, hyperscalers are going nuts:
Hyperscale compute revenue doubled year-on-year, driven by the scale out of natural language processing and recommender models and computing. [...]
When you use Microsoft Teams, you’re using GPUs in the cloud:
Over 25,000 companies worldwide use NVIDIA AI inference. A great new example is Microsoft Teams, which has nearly 250 million monthly active users. It uses NVIDIA AI to convert speech to text real time during video calls in 28 languages in a cost-effective way.
The fall version of GTC, Nvidia’s big conference, is all about Software. And there was *a lot* of software:
We introduced 65 new and updated software development packages, bringing our total to more than 150 serving industries from gaming and design to AI, cybersecurity 5G and robotics. One of the SDKs is our first 4 licensed AI model, NVIDIA Riva, for building conversational AI applications. [...]
CUDA has been downloaded 30 million times, and our developer ecosystem is now nearing 3 million strong.
As Steve Ballmer would say, ‘developers developers developers’.
That avatar system is essentially a robotic system. And the way that you would do that is, for example, the 25 million-or-so retail stores, restaurants, places like airports and train stations and office buildings and such, where you're going to have intelligent avatars doing a lot of assistance?
They might be doing a check out, they might be doing check in [...] So the virtual robotics application, digital avatars is going to be likely the largest robotics opportunity. [...]
I believe Omniverse Avatar will be in drive-thrus of restaurants, fast food restaurants, checkouts of restaurant, in retail stores all over the world within less than 5 years.
Interesting way to think about it. Most of us probably think of robots a bit too narrowly, like metal things with arms to manipulate the environment. 🦾
But having a kind of kiosk with a display showing an AI-powered avatar that you can talk to for customer service can have soooo many applications.
Chips are enablers, but [chips] don't create markets. Software creates market. I've explained over the years that accelerated computing is very different than single purpose computing. [...]
And so whenever you want to open a new market by accelerating those applications or their domain of application, you have to come up with new stack. And the new stack is hard because you have to understand the application, you have to understand the algorithms, the mathematics. You have to understand computer science to distribute across, to change something that was single threaded and make it multi-threaded, maybe something that would be done sequentially and make it process in parallel you break everything, you break storage, you break networking, you break everything.
And so it takes a fair amount of expertise, and that's why we say that over the years -- over the year, the course of 30 years, we've become a full-stack company because we've been trying to solve this problem price through decades.
Hammering home this point, but it’s an important one. 🔨
It took half a decade to start building Omniverse but it built on 1/4 of century of work. In the case of the Omniverse Avatar, you can literally point to Merlin the recommender, Megatron the language -- large language model, Riva the speech AI, all of our computer vision AIs that I've been demonstrating over the years.
Everything builds on top of everything that came before, that’s why it’s hard to build this kind of stuff if you’re starting from zero. 🧱
Question on the supply situation, on fabs and packaging:
we have secured guaranteed supply, very large amounts of it, quite a spectacular amount of it from the world's leading foundry. And substrate in packaging and testing companies that are integral part of our supply chain. So we have done that and feel very good about our supply situation, particularly starting in the second half of next year and going forward.
Where Facebook’s capex is going, along with the hyperscalers:
we expect next year, the cloud service providers to scale out their deep learning and the AI workloads really aggressively. And we're seeing it right now
How far along are we when it comes to GPU acceleration?
Every single server will be GPU accelerated some day. Today, of all the clouds and all the enterprise, less than 10 %. That kind of gives you a sense of where you are.
In terms of the workloads, it's also consistent with that. In the sense that a lot of the workloads still only run on CPUs, which is the reason why in order for us to grow, we have to be a full-stack company.
👋
Interview: Jensen Huang, Nvidia CEO
Huang did a long and detailed interview (the way I like ‘em) with Timothy Prickett Morgan.
Here are my highlights:
Q: How big is this Omniverse opportunity?
A: That there won’t be one overlay to Earth as you are seeing it. There will be there will be millions of overlays and millions of alternative universes. And people will build some, but AI will build a lot of them. Some of these Omniverse worlds will be some of model our own world, which is the digital twin; some will model nothing like our own world. Some will be temporary worlds, while we’re working on a more persistent world – just like we have scratchpad memory in a supercomputer, there will be scratchpad Omniverse worlds.
All of these worlds will be powered by, processed by, a AI computing system that is able to process the things that that we know it needs, which are visual information, sensor information, physics information, and automated intelligence, and they will be in datacenters. Datacenters will be, for all intents and purposes, alternative universe engines.
“Alternative universe engines”.
Damn Jensen is such a techno-poet! Who can spin a phrase like that, I ask ya?
the first one that Nvidia is going to build that is that a genuinely dedicated to Omniverse worlds is Earth-2, which is going to be a very large supercomputer designed with the primary purpose of simulating climate. It will be our contribution to helping predict the future of climate change
☀️ 🌎 🌪
the exciting part of it for me, is that it has tangible and known powerful capabilities to help us help us solve problems. And the reason what we know that so innately is because we simulate everything in our company. We simulate our architectures of chips, all of our computers. And because we simulate it, we could predict the future, we could see the future before it happens.
Earth-2 is probably the most tangible, powerful benefit of digital twins. You could apply that same concept to factories, you could apply that same concept to a fleet of autonomous vehicles connected together in a virtual world that we call Omniverse, and there are digital twins of the robots, and you could imagine designing the factory and designing the robots, then teaching the robots how to be good robots and as you operate them, you improve them. You optimize them all in these virtual worlds and then bring them into the real world. That’s what Omniverse is about.
Must easier to do the iterative work, the tweaking, beta-testing, and high-risk scenarios inside of a simulation than out in the real-world.
Companies that can use these types of technologies to develop their products, both software and hardware, will leave those that can’t behind.
Q: How does [Omniverse/Metaverse] keep the business growing at the current rate? Does it accelerate it further?
A: It absolutely accelerates it.
Our vision of the future of datacenters is that a datacenter is a computing engine that processes applications that are gigantic in scale but has combinations of everything from physics simulation to artificial intelligence to computer graphics. And when you think about that datacenter, and who would be best at it building it, that would be us. And, and it is also exactly the reason why GPUs are really quite the perfect engines for this Omniverse world because you have to do physics, you have to do AI, you have to do computer graphics – and you have to do it at extremely large scales.
It’s the alternative universe engines again. It’s logical that a company that first specialized in simulating 3D environments for games on 1 computer would be well-positioned to have the skills to scale up and simulate larger environments on clusters of computers.
Turning the world into a video-game, so to speak…
Nvidia has been adding building blocks to that original foundation for a long time, building software SDKs, buying Mellanox to have plenty of horizontal bandwidth inside data-center, and developing AI accelerators to power that engine.
With the problems that we are solving today, everything from fractionalizing the computer so that we can scale it out to being able to scale it up to do some problems – you simply can’t break down some problems so you have to scale up – to having millions of people inside that cloud native environment that is still a supercomputer. We are trying to solve all these problems that lead to this future world. Some people think it is interesting that Nvidia wanted to turn a supercomputer into a cloud native system. For what reason? Well, you have to share Omniverses with millions of people. This isn’t just the place that you go to by yourself. And why are we working on AR and VR – Nvidia doesn’t make displays. Well, I want to make it possible for you to tunnel into and out of Omniverses. AR is how the AI comes out of the Omniverse into our world, and VR is a wormhole that we use to go into the Omniverse.
Ok, this is interesting. Read that last line, and I think you get some clarity on the whole AR vs VR debate. It’s just a matter of where that vector is coming form…
There’s a fundamental difference between Omniverse and video game engines. And the fundamental difference is that everything is generated in real time in Omniverse. You can’t pre-bake stuff like you can in a video game. [...]
In Omniverse, literally everything is done in real time. That is an incredible miracle. When you drop a ball, it lands on the ground and bounces off the ground. If it’s if it’s a metal ball, it’s a rubber ball, because of the physics engines, it does the right thing. Physics is simulating in real time, collision detection is done in real time — nothing inter-penetrates. And all the lighting is done in real time. That’s the insane part of Omniverse.
Omniverse as a standard in the middle of all these software tools used to create 3D worlds:
When you are in the Adobe world, that’s a virtual Adobe world, they have their own data set and data structure, people who are designing an Adobe design in Adobe. There are Dessault Systemes worlds and PTC worlds and so on. Just like websites are connected with HTML, if things are connected through some standard, I can share something with you through a common portal, which in this case is based on Omniverse and what we call Universal Scene Description, or USD. And this common portal lets all of us see what’s inside and see our contribution to that world. We could actually be building this virtual world together, see it being built up from the ground up. It’s like Google Docs, but for 3D. [...]
Somebody could be in VR, somebody could be in AR.
Like Google Docs, but for 3D.
Q: I don’t know how much of the company is actually dedicated to software versus hardware.
A: Three quarters of the company is in software.
Let that sink in. A company known for its physical products — GPUs that go into PCs or into large data-center racks, mostly — has 3/4 of its engineers doing software rather than hardware.
I have never, not even one time, thought that we weren’t being paid for software. Nvidia has always been being paid for software. It just so happens that you got it in the device, and that is no different than an Apple iPhone, and look at the richness of the software that comes in that device. [...]
When you buy a computer from us with all of our technology in it, and magically years later, it gets faster just with software downloads. Clearly, the value that we deliver is largely in software. You bought the hardware and got its initial performance, but you could get 3X, 4X, 10X performance increase in the life of that hardware without ever changing the hardware and all through software updates. So the value of our products is, therefore, obviously largely in software. In every single respect, software is how we see the world, and the strategies that we execute, and the culture we create in the company for 28 years, has been that we are a software company.
Here’s a very insightful explanation of how hard it is to be in Nvidia’s business, because if your customers need to re-write all their software to work with your chips, they may just decide to buy a few more units or wait around for Moore’s Law to deliver the performance boost, so you have to offer something very compelling, and stay ahead of Moore’s Law:
that’s the reason why, in the history of time, there’s never been another computing architecture aside from CPUs. Until now, with accelerated computing. And the reason for that is all the reasons that I said it’s just insanely hard to refactor the entire stack on the one hand, not to mention convincing the person who owns the application to do it in the first place. They will just wait for Moore’s Law is so much easier. It’s so much easier just to buy a few more nodes. [...]
the ultimate competitor is doing nothing and waiting for Moore’s Law. We are a $10 billion datacenter business, which is maybe 5 percent of datacenters, what that’s another way of saying that 95 percent of datacenters are all CPUs. And that’s the competition.
That’s why it took them years and years to slowly build the software stack and get it trusted and adopted. Someone else can come out with a great new piece of silicon tomorrow, but without all the software ecosystem, pieces of the puzzle are missing. 🧩
In this new world of computing, most of the hard problems that you want to solve are not are not 50 percent away or 2X away. It’s a million times away.
In any other field, this kind of scale mismatch would mean that something is “impossible”, but in computing, it just means “let’s work harder for a while”, which is kind of amazing — the whole space is definitely one of humanity’s greatest accomplishments.
So here’s the here’s the amazing thing. If I can get a neural network to obey the laws of physics, I know one thing about neural networks that I can do very well, which is I can scale it up incredibly. This algorithm, we know how to scale it. So GPUs made it possible for us to do physics informed neural networks, which allows us to then scale it back up with GPUs. GPU acceleration gave us 20X to 50X on physics. Now, all of a sudden, this neural network, because it’s multi physics, all of the partial differential equations are all learned away. All you have left now is neural networks, and we have seen examples 10,000X to 100,000X faster – and I could keep it synchronized with my observed data that I’m getting every day from the real world. And then on top of that, because I can parallelize it, I can now distributed across 10,000 or 20,000 GPUs and get somewhere between 100,000,000X to 1,000,000,000X.
That’s why I’m going to go build Omniverse. The time has come where we could go create these incredible digital simulations of the world. We are going to give our ourselves a leap and this will change computer science. I am completely convinced this is going to change scientific computing altogether. This is really about how computing has fundamentally changed because the computer science changed the algorithms and now the algorithms are coming came back to change the computer science.
Now that’s *vision* and *ambition*. We need a lot more of that among founders and leaders…
👋
Interview: John Malone’s yearly interview with David Faber
FTC Kills “click to subscribe, call to cancel”
The Federal Trade Commission issued a new enforcement policy statement warning companies against deploying illegal dark patterns that trick or trap consumers into subscription services. The agency is ramping up its enforcement in response to a rising number of complaints about the financial harms caused by deceptive sign up tactics, including unauthorized charges or ongoing billing that is impossible cancel. [...]
Marketers should provide cancellation mechanisms that are at least as easy to use as the method the consumer used to buy the product or service in the first place.
I felt a great disturbance in the Force, as if millions of customer-retention call center voices suddenly cried out in terror and were suddenly silenced…
Science & Technology
As someone else points out:
the sad thing is, its' likely a lot more. I don't know the exact numbers off the top of my head, but this would likely be emissions per year at best.
Aren’t we all?
The Arts & History
Analysis of the Style of Visual Effects in Villeneuve’s ‘Dune’
At the risk of over-exposing Dune in this newsletter, here’s an interesting short vid that looks at editorial choices that were made to make the world of Dune seem more real and grounded in reality, as compared to a lot of other big blockbusters (*cough* Michael Bay *cough*) where the camera is flying around in a CGI world that looks like a video game.