Buckle Up.
This is not the ‘market is going to fall apart, buckle up’ bear prophesy. This is the good kind.
The AI Revolution Is Gaining Momentum.
Bill Gates believes Generative AI is the greatest technology step-change post the internet.
Gen AI is developing fast, but not fast enough for most public market investors.
Why?
Generative AI is 1) capital intensive and 2) data intensive.
To initiate a real Gen AI project, businesses need GPU capacity and and an integrated dataset to iterate and learn.
Nvidia GPUs are the hottest commodity of the year, only after Taylor Swift tickets. They are hard to find.
Integrating enterprise-wide data and moving it into an appropriate data warehouse environment also takes time.
Nvidia was the sole AI beneficiary for the first nine months of the year. Now, this list is growing.
- Microsoft Azure reported a 2% pt acceleration from AI workloads and slowdown in optimizations.
- Amazon AWS is optimistic that AI workloads are accelerating into 4Q.
- Datadog reported a 2.5% ARR mix from AI focused startups.
The benefit evidenced today is from AI centric companies. Think of these as the ones offering the AI picks and shovels.
The users of AI are getting ready to deploy these picks and shovels.
The benefits of AI will be bigger as most enterprises - regardless of size - will be able to find both revenue and cost synergies. AI is an offensive investment.
No company can afford to ignore AI and lose its competitive positioning. AI is also a defensive investment.
Every company will have an AI strategy.
At a high-level, the three layers to benefit from AI are -
1) Chips and datacenter hardware
2) Infrastructure
3) Application layer
The benefit started at layer 1 and is now slowly spreading to layers 2 and 3.
We are still very early.
If the late 90’s are any indication, AI will turn into a full-blown mania in a few years.
Buckle up.