Market Narratives That Don't Add Up
NVIDIA's CUDA Moat and the Tariff Paradox
Introduction: Questioning Popular Market Narratives
I’m seeing some narratives floating around that don’t make sense to me. The first is NVIDIA’s moat being CUDA. The second is tariffs both raising $1T a year in revenue and bringing jobs back.
The NVIDIA Paradox: CUDA as an Enduring Moat?
Let’s start with NVIDIA’s moat being CUDA. An NVIDIA story in the market today is that NVIDIA is worth $3T because they have such a strong moat with their CUDA software for developers. I’ll admit it; I use CUDA. But why are we using CUDA? To build AI software. AI software that is getting smarter all the time. AI software that is making it easier than ever to write new software. Which means… writing software is getting less expensive and easier each passing day.
The AI Self-Disruption Problem
NVIDIA is priced to sell chips for AI at 70% margins for the next thirty years. Either the AI won’t really work. Or the AI will be able to replace CUDA long before thirty years have passed. My point here is that either AI demand will lessen, NVIDIA’s margins will lessen, or NVIDIA has a moat that isn’t CUDA. I don’t see how people believe that AI demand will remain strong, but writing a CUDA software library will remain a barrier to entry.
NVIDIA's True Competitive Advantage: Speed, Not CUDA
My take is NVIDIA’s only potentially sustainable moat is that they are moving faster than everyone else. CUDA is a weak moat. NVLink is the stronger moat. But their pace is what might keep margins high.
The Tariff Contradiction: Revenue vs. Reshoring
Turning to the other narrative contradiction. How can tariffs both raise $1T a year in revenue and bring manufacturing jobs back to the United States? If the jobs come back, why would we be importing goods and paying tariffs on them? I don’t see how this makes any sense, but I’ve read it, Bessent says it, Trump says it, and people seem to believe it. Even if we assume $1T in tariffs won’t tank the economy, I don’t see how the long-term equilibrium is lots of tariff revenues so we don’t need income taxes, AND lots of jobs brought back to the US.