There's a date that will be etched in the annals of human history – November 2022. This marked the debut of our dear friend, ChatGPT, and ever since, the world, frankly, hasn't been the same. If you've so much as sneezed in the direction of the World Wide Web lately, you'd know about generative Artificial Intelligence (AI).
Now, you might think this technology appeared on the scene faster than you can say "technological singularity." However, it's essentially the culmination of seven decades worth of AI evolution. Before, we had an AI for every Tuesday and a different one for every odd-numbered Friday. They were charming, but rather one-trick ponies. Enter generative AI and – voila! – the rulebook has been tossed out the window.
It seems like everyone and their dog is vying for a piece of this AI pie. The poster children of AI today, ChatGPT, Elon Musk's xAI, and Google's Bard, are practically the main event. All these big tech players – Microsoft, Google, Meta, Amazon, Apple, Tesla – are throwing billions at chips and other shiny bits to train their AI models. If history has taught us anything (remember the Yahoo vs Google saga? The Blackberry vs Apple showdown?), we know this space won't be a one-horse race.
One fact is unmistakable – tech giants are pumping in an eye-watering amount of money to gain an upper hand in this race. Meta has splurged on over 16,000 GPUs, ringing the cash register to the tune of $240 million. Not to be outdone, Musk's xAI recently shelled out at least $150 million for 10,000 GPUs. Google, not wanting to be left in the dust, dropped $300 million in Anthropic to go toe-to-toe with OpenAI.
And that's just the start. Brace yourselves for more breathtaking sums splurged on luring AI talent, running, and upgrading the tech.
Some tech moguls have already begun to squeeze out a profit. Take Microsoft's Copilot – a paid service today, but destined to become the standard for Office365 in a year or so. This one move could send Microsoft's revenue skyrocketing past $50 billion based on current users.
And let's talk about the growth prospects here. Strap in, folks, because they're jaw-dropping. Estimates suggest that the AI market will double every 1.4 years. With TSMC forecasting a compounded annual growth rate close to 50% for the next half-decade, it's fair to say that the future's looking rosy. AMD's CEO, Lisa Su, recently echoed this sentiment, predicting the AI server market will leapfrog from $30 billion to over $150 billion in the next five years.
AMD is not just making predictions but taking action too. Their upcoming top-tier MI300X chip, slated to outdo Nvidia's A100 chip, is set to make waves later this year. For those who enjoy a flutter on the stock market, this could be a good reason to show AMD a bit more love than NVIDIA.
What makes generative AI so darn enticing is its universal appeal. Whether you're a Fortune 500 company or a fledgling startup, you can make use of it. It can draft up a tune, answer your questions, even write code to whip up a fancy new website or app. Specialized versions could be just the thing you need for crafting snappy marketing copy or providing live stock and bond analysis.
The tech adoption we saw in 1999 and 2007 will look like child's play in comparison to what's coming. Companies are set to embrace AI faster than a bear would honey. It promises to make them more efficient, productive, and customer-responsive. Plus, there's money to be saved. IBM's CEO recently told Bloomberg that he expects AI to take over 30% of office jobs in the next five years, potentially saving nearly $780 million annually.
If companies don't jump on this AI bandwagon, they risk being left in the dust. Think of it as a stampede of corporations rushing to implement AI. There's just no way they can afford to ignore this tech.
We'll see three main players cash in: the innovators, the integrators, and the adopters.
Innovators are the visionaries, making significant strides in hardware and AI programming. Think NVIDIA and AMD.
Integrators play the role of the middleman, helping businesses adopt AI. You wouldn't trust an AI that hasn't been thoroughly vetted – the reputations of giant accounting and law firms hang in the balance. This is where a top-notch integrator becomes crucial.
Adopters will form the lion's share of the market, with early birds reaping the most rewards. The future? Every serious business will need to get cosy with AI.
The only folks who might disagree are old-school economists like Paul Krugman. They might see this as a fleeting trend, like something out of a 100-year-old playbook. But then again, some folks also thought the internet was a fad.
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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office, and a hedge fund.