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"Science and Technology Innovation Board Daily" July 27th On November 30, 2022, the emergence of OpenAI ChatGPT led a group of giants to kick off the AI ​​arms race. Now, more than 600 days have passed, and the AI ​​arms race is still going on.Huge capital expenditures still cannot bring back equivalent actual benefits. The fastest companies in AI technology have been dragged down by AI in their financial reports。

The first to bear the brunt is OpenAI. According to The Information, citing relevant data and analysis,OpenAI could lose $5 billion this year and will need to raise more cash in the next 12 months to survive. Behind the huge funding gap, OpenAI's total operating costs this year may be as high as $8.5 billion, including $4 billion in reasoning costs, $3 billion in training costs, and $1.5 billion in labor costs. No wonder Sam Altman called OpenAI "the most capital-intensive startup in Silicon Valley history."

OpenAI isn't the only one in trouble.

The earnings season for tech giants has kicked off. Among the seven US stock companies, Google and Tesla have released their earnings reports this week, but their results failed to satisfy the market.(Big Tech) has yet to clearly answer questions about AI’s effectiveness and profit potential. ” said Kathleen Brooks, head of research at XTB.

A few days ago, during Google’s earnings call, analysts kept asking the company’s CEO Sundar Pichai: When will Google’s $12 billion investment in AI start to pay off?

in other words,Is AI worth the big investment?

High investment, low return

There is no doubt that AI is a huge money-eating beast at the moment. Wall Street analysts,By 2026, large tech companies will spend $60 billion per year developing AI models, but they will only generate about $20 billion in revenue per year from AI.。

Jim Covello, head of global equity research at Goldman Sachs, predicts that investments in expanding AI infrastructure (data centers, utilities, applications, etc.) will exceed $1 trillion in the next few years, but the key question is: what $1 trillion problem will AI solve?

“Replacing low-wage jobs with costly technology goes against the trend of technological change I have seen for 30 years.Even in its early days, the Internet was a low-cost technology solution.Generative AI has been around for more than a year, “but it has yet to produce a truly transformative application, let alone a cost-effective one.”

The analysis contrasts with another Goldman Sachs report from more than a year ago.The report pointed out that in the next 10 years, AI is expected to automate 300 million jobs worldwide and increase global economic output by 7%, which has triggered many reports and analyses on the disruptive potential of AI.

FOMO of tech giants

Why do technology giants continue to invest heavily in AI when it drags down financial performance and makes it difficult to see economic returns?

Because of fear。

There is a word in English called FOMO (fear of missing out), which is translated into Chinese as "fear of missing out", which means that a person is afraid of missing a social opportunity, a new experience, a profitable investment... Similarly, technology companies are also afraid of missing the AI ​​opportunity.

Zuckerberg has been hoarding Nvidia chips and spending billions of dollars to allow Meta to develop and train large AI models. But this week he himself admitted thatThere may be overinvestment in AI. “Many companies may have overbuilt (AI), and looking back in the future, we may have spent billions of dollars more.”

Although AI is expensive, Zuckerberg believes that Meta's decision to invest in AI is "rational" because if you fall behind, "you will lose your position in the most important technology in the next 10 to 15 years."

Google CEO Sundar Pichai, who was questioned by analysts, also admitted in the conference call thatGoogle is probably spending too much money on AI infrastructure, which is mainly Nvidia's GPUsBut Pichai believes that the company has no choice. In the face of such a technological wave,“The risk of underinvesting is far greater than the risk of overinvesting”As long as you can maintain a leading position, then excessive capital expenditures are relatively speaking a "small price to pay."

“Game theory and FOMO are driving AI capex, not actual revenue/applications.”Sequoia Capital partner David Cahn said bluntly.

In the eyes of cloud computing giants, AI is both a threat and an opportunity. They do not have the leisure to wait and see how the technology develops, and they must act now. According to Cahn's calculations, in the technology industry, AI needs to bring in $600 billion in revenue each year to justify the spending on data centers and chips.

▌It’s better to sell shovels than to follow the trend and dig for gold

Tesla's capital expenditure on AI this quarter also reached $600 million, a large part of which was also paid to Nvidia to buy GPUs."We have no choice," Musk said in a conference call a few days ago. After all, Nvidia's chips are in high demand, high in price, and difficult to obtain.

During the California Gold Rush in the 19th century, few gold diggers became rich overnight, but the country produced Samuel Brannan, the richest man in California who dealt in gold mining equipment, Levi's who designed jeans for gold diggers, and Darius Ogden Mills who opened a bank by selling shovels.

In the 21st century, Nvidia has become the "shovel seller" in this "AI gold rush." ​​In addition to Tesla, Google, and Meta, technology companies such as Microsoft, Amazon, and Oracle are also Nvidia's customers. These companies' large investments in AI have supported Nvidia's record-breaking performance and stock price.

Since the launch of ChatGPT, Nvidia's US stock price has risen by more than 600%, far surpassing Google, Microsoft and others.

Peter Norvig, the legendary American programmer and director of Google Research, once said,Once a company's market share exceeds 50%, don't expect it to double its market share.. This is a simple and easy math problem.

Nvidia accounts for 82% of the global data center AI acceleration market and monopolizes the global AI training market with a 95% market share. There is really not much market share space left for this "computing power overlord".

For those who are familiar with the history of the development of the Internet, it is hard not to think of Cisco in the early days of the Internet when seeing the current surge in Nvidia's stock price.

In the 1990s, the development of the Internet led to a surge in demand for network equipment, and Cisco's market value soared. In 2000, with a market value of $555 billion, Cisco became the world's most valuable company. At that time, Cisco's market share of network switches approached 70%, and its market share of network routers exceeded 85%. However, with the bursting of the Internet bubble, Cisco's market value has been falling, and now it is difficult to compare with technology giants.

At the heart of the current wave of AI investment is the anticipation of its transformative potential, from automating routine tasks to overhauling entire industries.

If tech giants have enough servers and computing power to run AI, and if customers cut back on investment because they don't see returns, will the demand for AI infrastructure be maintained? Can Nvidia still sell its GPUs? Will Nvidia repeat Cisco's history?

Conclusion

The "bubble" argument surrounding Nvidia and AI has never stopped, and despite the fierce debate between bulls and bears, it is difficult to draw a tangible conclusion.

This AI wave has passed the hot initial stage, and a number of startups have collapsed.Character AI, a chatbot company founded by a former Google employee, has planned to "sell itself" to Google and Meta due to financing difficulties; Inflection AI, founded by a former DeepMind employee, has its founder and a group of employees jumping ship to Microsoft; Stability AI, the leader in AI raw image processing, has also had to lay off employees...

After the great waves, the technology giants are still fighting in the battlefield of AI, and after winning the entry ticket, they are trying to occupy the high ground. Every technological change is a baptism of the industry. Whoever can seize the dominance of key technologies will have the power to dominate the future. After all, in essence, the history of human technological progress is also a history of power struggle.