A news article in the Financial Times of the UK this week raised several eyebrows. Sam Altman is reportedly in talks to raise US$ 5 to US$ 7 Trillion for a proposed AI – Chip R&D, development and implementation eco system. He believes incumbent chip/technology providers do not have the wherewithal to flourish the AI revolution.
AI has been a technology in waiting since the 1950’s. Alan Turing gets credit for alluding to computer-based intelligence in a paper. In 1955, John McCarthy held a workshop at Dartmouth on “artificial intelligence,” the first use of the Word, and how it became popular. Since then, the technology evolved to focus primarily on expert systems. AI underwent periods of excited frenzy and deep winters; expert systems were eventually discarded. Instead a paper written in 1943, by a young neuropsychologist and a mathematician about how human neurons work became the foundation of Neural Networks. In 1986, Geoffrey Everest Hinton wrote a paper on Neural Networks which was a turning point and is the basic foundation for AI technology today. He was awarded the Turing Award in 2018 for the same.
By the year 2002, AI emerged into the mainstream with Google. AI, especially Neural Networks (NN ), are data hungry. It is sheer serendipity that the amount of data available on the Internet, broadband connectivity, Natural Language Processing, Transformers and availability of so many other related technologies with high-end server farms resulted in Goldilock’s conditions for researchers to experiment with what is now known as LLM’s – Large Learning Model’s. In 2010, Deep Mind, an AI company, was formed in the UK (acquired by Google in 2014), and developed an NN-based software that beat the world champion of “GO,” a Chinese / Korean strategy board game in 2016. This event ignited public imagination in the realm of AI. AI progressed steadily thereafter.
In 2020, Open AI, set up by Sam Altman, with other founders (Initially Elon Musk), started writing ChatGPT, an LLM Beta and Dalle-M ( An graphic generation AI tool). Both were released for public use in November 2022 and acquired a following of 100 million users in just two months. Since then, Microsoft has invested US$ 10 Billion in the startup. Within a short period of ChatGPT and Dalle-M’s launch, there was a tsunami in Silicon Valley. Google launched Bard ( Now renamed Gemini), Meta launched LLaMa-2, Anthrophic, and Inflection raised funds for their LLM, and not a day goes by with a startup investing in AI-backed solutions. As per estimates in “ State of AI Report 2023” over US $ 234 Billion of funding has flown into AI on a global level from 2021-2023. Some of the noteable deals have been US$ 10 Billion in OpenAI, US$ 4 Billion in Anthrophic and US$ 1.3 Billion in Inflection. While the big deals are more in the realm of generic LLM’s, there is tremendous interest in domain specific AI focused for example on Healthcare, Education, Legal services etc.
As a technology, AI has tremendous potential in virtually every domain of human endeavor. It shall cause shape shifts in Agriculture, Health, Education, Manufacturing, Financial Services, Art, Culture virtually every human endeavor.
However, as we have seen in the past, revolutionary technology’s go through a hype cycle, followed by huge investments, a period of customer disolution followed by adoption. The Media and Stock market hype created by AI seems to be falling in that trap. My assesment is that some low hanging fruits shall be available in the next two years followed by radical success in a 3-7 period. As a part of my research I have gone through dozen’s of books published in the recent past. Henry Kissinger, Eric Schmidt, and Daniel Huttenlocher jointly wrote- Age of AI, Super Intelligence- by Nick Bostrom, The Master Algorithm- by Pedro Domingos, The Coming Wave- by Mustafa Suleyman, Architects of Intelligence, Possible Minds-25 ways of looking at AI, among others. There seem to be three messages . One- AI is a revolutionary technology that will majorly impact humans in every domain. Two- If unregulated, it could be a cause for concern with AGI taking over humanity. Three- It shall bring about significant improvement in lives of humans and unforeseen financial growth. Because of a lack of credible data, none of the books venture to project the economic impact of AI on different domains.
Silicon Valley has coined the term “The Magnificient Seven” ( Inspired most probably by The Seven Samurai’ of Akira Kurosawa), seven companies whose market capitalization has zoomed up due to their AI enablement. Microsoft, Amazon, Nvidia, Meta, Apple, Alphabet, and Tesla have a combined market capitalization of around US$ 13 Trillion in the recent past. That is the total GDP ( 2022 ) of Germany, Japan, the UK, Netherlands, and South Korea put together. AMD and Arm, two more Semiconductor players, are also playing catch-up fast having acquired the sorbiquet of AI chip companies. AMD has already released a product while Arm’s technology forms a part of most AI chips.
As per the Semiconductor Industry Association of USA, the global revenues of the industry were US$ 527 Billion. A report by McKinsey predicts that the revenues shall shoot up to US$ 1 Trillion by 2030. Contrast this with the ask of US$ 5- US$ 7 Trillion by Sam Altman for the AI Chip project and the market cap of “ The Magnificent Seven” – US$ 13 Trillion. Suddenly the figures do not smell right.
OpenAI recently announced that in 2024, they may hit revenues of US$ 2 Billion, though they shall be making losses due to the high cost of training their LLMs. Now we have an acknowledged industry leader whose 1-year, 4-month success without substantial revenues and zero profits is looking at raising trillions of dollars followed by a messianic bandwagon of who must be the most innovative tech and financial experts in the world. At this moment no one is willing to give a contrarian view to Sam Altman and others. Founders, Investor’s, Technologists, indeed the entire world is dazzled and following blindly in the footsteps of a few people.
Let us look at some other number’s. The total GDP of OECD countries in 2022 was around US$ 60 Trillion. The benefits of the AI boom shall firstly be reflected in there economies. In 2022, their annual GDP growth rate was 2.8%. For the sake of argument let us suppose that AI shall provide higher GDP growth rates of 1% -2025, 1.5% – 2026 and 2.5% -2027. These are aggressive growth rate’s, but than – AI Crusader’s are making astronomical claims. From the base case of continued GDP Growth rate of 2.8% the incremental GDP increase in three years would add a whooping US$ 5.3 trillion dollars to the pot. So on an average US$ 1.8 Trillion per annum. Are these the kind of numbers AI Crusaders are playing with? If so maybe they could be right!
Open-AI has created ChatGPT-4, Microsoft has developed an AI application based on the same, named CoPilot. CoPilot is available as a bundle with Microsoft Office 365 Professional and empowers Word, Excel, PowerPoint, Outlook, and Teams. It enhances the capability of these software and improves productivity. So you can have crisp and clear documents in Word, snazzy PPTs, insightful Excel reports, and better management of your emails. There were around 400 million users of Microsoft Office 365 in January 2024. 20% are power users who would benefit from CoPilot. So that is 80 Million users. They will reap the power of AI. How will that translate into increasing revenues for their business? We shall know in a year or two.
ChatGPT is also available on Microsoft Azure Cloud. We do not have details of clients and the benefits gained from its use. Gaining clarity on this subject will take another year or more. In the meantime, Google has launched an AI Bot, Gemini, with a monthly subscription of US$ 20. There are pros and cons in ChatGPT / CoPilot vs Gemini; however, both shall fight for the same turf.
OpenAI has opened a rabbit hole whose promised destination is great financial power and maybe a superpower based on AGI- Artificial General Intelligence – power to the exercise control on humanity by a few technology companies.
We have seen this in the past: the Internet and Telecom Bust of 2001, the 2007-2008 Great Financial Crisis because of reckless and excessive financial risks created by the best financial institutions in the USA. We have seen the IOT Hype cycle and the luke warm reception of 5G technology.
Calmer and contrarian minds should also rise and reason and debate. Billions and trillions of investor money is locked up in the Nasdaq, and VC investments. Surely AI will succeed, and the benefits will pour in, but it will take time. The world works at its own pace. Technology absorption and adoption are time-consuming processes.
Should promised benefits be delayed or inadequate, we can have a significant crisis of confidence in the global stock market and wide spread bankruptcies in VC’s.
One contrarian has been Yuval Noah Harari the author of Homo Sapiens.
I quote. “Artificial intelligence could cause a financial crisis with “catastrophic” consequences”, who says the technology’s sophistication makes forecasting its dangers difficult. Harari told the Guardian a concern about safety testing AI models was foreseeing all the problems that a powerful system could cause. Unlike with nuclear weapons, there was not one “big, dangerous scenario” that everyone understood, he said. “With AI, what you’re talking about is a very large number of dangerous scenarios, each of them having a relatively small probability that taken together … constitutes an existential threat to the survival of human civilization.”
In similar vein , Ian Hogarth, chair of the UK government’s “Frontier AI” task force says.
“Since 2014, I have backed more than 50 AI start-ups in Europe and the US and, in 2021, launched a new venture capital fund, Plural. I am an angel investor in some companies that are pioneers in the field, including Anthropic, one of the world’s highest-funded generative AI start-ups, and Helsing, a leading European AI defence company. If you work at a major lab trying to build God-like AI, interrogate your leadership about all these issues. This is particularly important if you work at one of the leading labs. It would be very valuable for these companies to co-ordinate more closely or even merge their efforts. OpenAI’s company charter expresses a willingness to “merge and assist.” I believe that now is the time. The leader of a major lab who plays a statesman role and guides us publicly to a safer path will be a much more respected world figure than the one who takes us to the brink. Until now, humans have remained a necessary part of the learning process that characterizes progress in AI. At some point, someone will figure out how to cut us out of the loop, creating a God-like AI capable of infinite self-improvement. By then, it may be too late.”
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