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AI’s $600B Question

Obviously it’s a question that needs to be addressed: where are the returns on Nvidia GPUs?

Here are some of my thoughts on what’s missing from the article – not to say I have an answer, but to look at the article/question from other perspectives

1/ what are the risks of LOSING revenues if falling behind in AI? 

Case in point – likely that Google can’t keep its grip on the AI equivalent of iOS search engine bar (or whatever the gateway to AI functions and monetization) in the next decade.

2/ what are the risks of losing top talents’ interest if not doing AI? And the culture of being at the frontier?

People wants to be part of the next gen thing. To be precise, top talents want to be the center of the next gen thing. If they see peers doing AI, they will not forgive themselves not doing AI.

If the company is seen as not the frontier, that’s a big risk in the next decade of not getting the top talents naturally. I bet now Google needs to do EXTRA to get talents it wants vs in the early days they were drawn to Google.

3/ what are the “infrastructure”?

In the article, author mentioned railroads. So what exactly is the “railroad” now?

The GPUs?

Or the data centers?

Or the foundation models?

Where does the overinvestment risk lie? (I bet it’s the third; also DC to some extend)

4/ If there any “moral hazard” here?

By having investments in AI, VCs should be inclined to discourage similar investments from other people.

Few entrants would enhance their return – whether it’s foundation models or GPU resources (easier to get GPUs / falling prices).

It’s tricky.

Like inflation – you need to tell the public to spend less to lower inflation; if you tell the public that you expect inflation to be down too early, it would be harder to come down.

If you are telling people AI is a good investment, then it may make returns lower.

Few years ago, many car companies were committing to go full EV. Now it’s clear that won’t be the case.

Take Benz for example, in 2021 it stated it would go full EV for new models from 2025 onward and all EV by 2030 where market conditions allow. Now in 2024 it back pedaled, saying by 2030 will only do 50% EV.

Why?

– The most common reason is weak consumer demand due to weak charging infrastructure plus ICE outperforms in many use cases.

– EVs are not cheap enough.

What’s more?

Many countries don’t want to rely on China’s supply chain.

And?

There are deeper implications/concerns.

Auto industry in EU is built on ICE cars. The traditional car industry provides jobs, income, taxes, etc.

The stability of EU relies on traditional vehicles!

Btw, this also affects Japan with the same logic.

Auto industry is a smaller part of US economy directly, and US has Tesla, but US will likely be negatively affected if EU and Japan is unstable or poorer.

Therefore, either EU/JP needs to maintain competitiveness in the EV era, or they need to pivot to other industries (very hard; nothing in sight), or US will need to strengthen its own economy and rely less on EU/JP.