Austin Lyons on NVDA, ARM, Google TurboQuant & New AI Innovations

Sure. Yes. So historically, Nvidia was the first and they were the best and they were the only. We saw AMD come and try to play in the GPU space. But now at Nvidia's GTC, and the narrative was always just like, buy GPUs, they're the best for everything. They're the most flexible. Last week at GTC, Nvidia and Jensen Huang showed that if you take LLM inference, which is the defining workload of our era, you can actually break it down into subtasks if you want to think about it. For example, prefill and decode is what they call them. And you can run some of these workloads on GPUs, but actually to get really fast, like what they call ultra low latency and high interactivity for the user. So like really fast cloud coding, for example, you can actually slot in Groq chips and unlock this new performance level. And so, you know, that sort of changes the dynamics because if you can slot in Groq or Cerebras, it starts to say like, oh, who else could slot in here? And why should it be Nvidia? Now, Nvidia, for their moat, they're trying to take it up a level higher and say, hey, it's not about the individual components. It's about the whole system. All of the racks put together, who can give you the best optimized inference across the whole system. So Nvidia will continue to try to say, once you put it all together, it's our data center, everything branded Nvidia that matters. Even if you slot in other people, we believe that we can optimize every little piece and still unlock the best inference.

Yeah, totally. So in the data center that Jensen showed, Jensen and Nvidia actually had racks of CPUs that were Arm licensed CPUs that Nvidia makes. And Jensen's rationale was, hey, actually, CPUs are becoming the bottleneck for GPUs because there's still a lot of work that needs to be done on the CPU to keep the GPUs fed. Arm saw this as an opportunity for them to also not just license their intellectual property to people like Nvidia for those CPUs, but to actually make silicon themselves. And this is a big opportunity, huge opportunity. Historically, Arm for the last 35 years has only licensed their intellectual property. And then within the last handful of years, they took it a step further. And instead of just licensing the CPU design, they said, hey, we've got this thing called the compute subsystem, so we can give you more. So the CPU and some of the system IP around it. And those have, you know, they make 5% royalties or 10% royalties if they do more for you. But when they move into silicon now, they can sell the chip, they can make the money. Of course, the gross margins on a chip might only be 50%. Whereas on that IP that they were licensing, the gross margins were like 97%. So their blended margins will come down, but it'll be a lot of incremental margin dollars that are at play. And that's what investors are excited about for Arm. It's just, it's obviously a huge market to be able to sell into the data center, to sell silicon gives them an opportunity to drive a lot of top line and bottom line revenue.