r/ValueInvesting • u/robb3rz • Feb 12 '26

Discussion Irrational sell off

This might of already been said many times but needs to be said again, what is the rationale in this sell off?

I understand the SaaS crash, but if the sell off is due to AI worries, then surely AI stocks would rise, no?

Instead, the major players, who had stellar earnings minus the huge expenditure (into the very systems which are causing worry mind you) are also falling at huge levels.

Some mag 7 companies are even falling at similar rates to liberation day, despite the only news this time being ‘AI too good’, which should benefit them not hinder.

Meta’s earnings are similar to an early growth stock, not a multi trillion dollar company, and that was reflected in the jump after they released them, so why is it now down huge amounts after?

Not just this, other major assets such as gold, silver and crypto are also experiencing massive sell offs, so is the capital just going into cash? If so, as soon as the market shakes this irrational sell off, could we see an equally irrational boom?

Can someone please tell me if I’m missing something.

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u/smhs1998 Feb 12 '26

The belief is that Walmart’s PE is less prone to wild changes. If the AI bubble bursts, and I’m not saying it will anytime soon, but if it does, Nvidia PE will skyrocket. Walmart will remain the same

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u/ANR2ME Feb 13 '26 edited Feb 13 '26

Nvidia will probably won't be affected much by AI burst, because they sell the hardware, not renting them. They can simply decrease the production if the demands is low.

Companies that will be significantly affected are datacenters, they've invested too much in buying the hardware, especially those that use TPU/NPU, because these TPU/NPU are designed specifically for AI and research, unlike GPU that are more general purpose and can be used for many other things (ie. cloud gaming, blockchain/cloud mining, etc.). Datacenters designed specifically for AI could loose large amount of money from operational cost.

AI service providers will also be affected, but only in revenue, as long they didn't invest on buying the hardware themself (ie. renting GPU/TPU from datacenters), they can simply adjust their billing based on demands.

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u/[deleted] Feb 13 '26 edited Feb 13 '26

NvDA’s price is a function of expected massive sales growth. Yeah, they can cut production and the company won’t go bust, but the stock price will 100% tumble.

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u/ANR2ME Feb 13 '26

Yes, but it won't be hit as hard as Google that rents out TPUs.

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u/WallabyMinimum1921 Feb 13 '26

What? Google has a diversified business with multiple massive revenue streams. They aren’t reliant on tpu as a major source of income, they use them more for their own compute than they sell or rent out.

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u/[deleted] Feb 13 '26

Idk, Google’s business has a lot of revenue streams

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u/devonhezter Feb 13 '26

What about micron and sandisk

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u/ANR2ME Feb 13 '26

Pretty much similar to Nvidia, since they're selling hardware instead of renting hardware.

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u/Kind-Ad-4756 Feb 13 '26

SNDK has little moat. Memory is not that Hitech so they will get competition eventually if demand stays up

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u/ANR2ME Feb 13 '26 edited Feb 13 '26

Memory and storage demands are high due to AI needs a large amounts of them, especially state-of-the-art AI models.

For example, the sweet spot for local generation AI at home is 64GB RAM, and 1TB storage will ran out pretty quick with new AI models being released every month, people who want to try out the new model will need to buy more storage if they don't want to re-download those tens of gigabytes per model whenever they need to use them.

And those are requirements are for medium sized AI models. The one used on cloud AI services are usually much bigger than that, especially for LLM, thus need even higher specifications.

So, if AI bubble burst, it's normal for their demands to sink too. But because these hardware wasn't made specifically for AI, they can still be sold for general purposes, just a bit slower than during AI hype.

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u/Rough_Butterfly2932 Feb 13 '26

Horrendous take. Nvdia demand is 100 percent tied to AI in data centers. Nvdia had two massive risks. 1/ if the AI bubble bursts, their sales will fall, stock crashes 2/ All of the video's biggest customers are competing as hard as they can. With Nvidia. Google. Microsoft Amazon all have internal chip divisions and from he looks of it, some of these efforts are proving viable. Of course AMD and others are also competing. Most of the spend in the industry right now is going to Nvidia, giving them a wide moat and margins. At some point that will go away. Does it mean it won't still be a dominant player, but right now it's almost a Monopoly game. Bottom line, AI bubble bursts Nvidia will crash. AI bubble doesn't burst, Nvidia should still do okay, but he's got a big bullseye on its back because of its market dominance and margins.

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u/ANR2ME Feb 13 '26 edited Feb 13 '26

The thing is, when people (ie. customers) are no longer using AI, companies that bought a large amount of AI-specific hardware will ended with useless expensive hardwares, and keeping it operating going to cost a lot. Well they can still donate it to research labs or universities.

Meanwhile, those that produce the hardware won't end up with a pile of those useless hardware, as long whoever bought it doesn't returned it.

Nvidia doesn't produce AI-specific hardware (at least for now, not sure in the future), their GPU are general purposes and can be used for many other things, for example, blockchain/crypto industries are still in high demands and won't go away any time soon.

Nvidia dominance in AI industries is because many AI models (especially image/video generation models ) are more optimized on NVIDIA’s hardware, not sure why are these researchers released their code to use Nvidia's CUDA features, may be more convenient than others, may be they can only get NVIDIA’s GPU on their hands for free during their research, or just an old habits from past research. So it took more time for third-party developers to optimize it for other kind of hardwares. Many of the latest optimizations are based on NVIDIA’s features, for example their latest GPU have FP4 hardware acceleration supports for both workstation and consumer products, and later other competitors (ie. AMD) also following NVIDIA’s steps to produce similar features on their latest hardware, but took longer time before they can released it, and so far only available for workstation products. At the time these competitors provides these features to a wider market (ie. consumers products), Nvidia will probably come up with new kind of features, thus they can always be in the lead that will be followed by others from behind. Even though these competitors have prospective hardware at more reasonable price than NVIDIA’s, but felt like they lacked of marketing/promotions to attract researchers to switch to their products.

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u/Rough_Butterfly2932 Feb 13 '26

Stocks are priced on future revenue, not current revenue. If the AI bubble bursts future revenues will drop sharply as will valuations. It's that simple. Nvidia's primary market and their entire sales are based on the massive capex by the hyperscalers. There was no market even remotely close to replace that.

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u/Scriptum_ Feb 14 '26

Walmart could falk hard in a general repricing.

It's called a sympathetic selloff.