Nvidia and the Longevity of Technology Moats
How does Nvidia's moat compare with successful, longstanding examples?
Generative AI products from OpenAI, Google and their competitors are all making headlines on what seems like a weekly basis. That also means that it’s hard to escape Nvidia, who provides much of the hardware that underpins these models. As a result of the ‘AI boom’ Nvidia's market cap now exceeds the one trillion dollar mark.
Much of the discussion of Nvidia’s valuation has centred on how big the market for its GPUs might be. But there are other dimensions to this valuation.
In our last post on Nvidia, we discussed the ‘breadth’ of Nvidia’s moat. That it has an immensely strong position not only in AI but in the full range of what might be called ‘embarrassingly parallel’ computing.
This post is about the another aspect of that moat. Its longevity, or ‘how long will it last?’
We tend to think of technology as being fast changing, with incumbents being regularly disrupted by new entrants. But there are counterexamples.
We look at two examples of technology moats that have lasted for decades, Intel’s x86 and IBM’s System/360. How strong is Nvidia’s moat when compared with these highly lucrative examples? What can we learn from the longevity of these technologies? Both had lots of challengers over the years. What was it that enabled them to maintain their dominance for so long?
Two important points of clarification first. First, we’re talking about the ability to sustain a competitive advantage over decades rather than over a few years.
Second, this is meant to be a thought provoking exercise rather one that leads to any firm conclusions about Nvidia’s valuation. Please see the disclaimer at the end of the post.
That said, let’s now compare three aspects of Nvidia’s position with x86 and S/360.
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