AI: Moving from 'AI Fear' to AI 'Fear of Missing Out'. RTZ #340

...speeding away from AI fears in 2023

The Bigger Picture, Sunday April 28, 2024

This week as we move into June, approaching the half way point in 2024, it may be useful to take stock of where we are in the AI Tech Wave. It’s about eighteen months from OpenAI’s ‘ChatGPT moment’. And this year has accelerated AI development, innovation, and investments faster and earlier in this tech wave, than others before it. So for this Sunday’s AI Bigger Picture, it may be useful to zoom back a bit on how fast we’ve moved from last year. Let me explain.

In a year and half, we’ve gone from OpenAI’s ChatGPT ‘Big Bang’ in November 2022, to ‘AI Doomer town’ in 2023, to ‘Let’s get going already’ AI Acceleration this year. As I’ve recounted in detail in 340 daily posts here now, we’ve seen an accelerating pace of AI Infrastructure investments. They’re running at rate of a quarter of a trillion dollars already by year-end 2024, growing more than 25% per year for now. This includes public and private financial investors, big tech companies rushing to build out their LLM AI and underlying AI chip, data center, power, and talent infrastructure.

And of course a Cambrian explosion of AI innovation and startups of thousands of companies worldwide. They populate every one of the six boxes in the updated AI Tech Stack chart below.

The global sentiment around AI is rapidly shifting from immense fear and dread over AI existential risks, Safety, and ‘much to be desired’ Reliability last year, to a corporate and national ‘Fear of Missing out’ (FOMO) to the ‘other guy’ this year.

The Big Tech companies are reporting their second half 2024 quarterly results, and are running at an investment pace of tens of billions of dollars each this year and next.

For a moment, it’s useful to pause and note the apex of the ‘AI Doomer’ Sentiment last year that almost resulted in the firing and permanent removal of OpenAI founder/CEO Sam Altman, and possible closure and/or ‘acqui-hire’ of its 500 plus (then) employees by partner Microsoft. That sense of possible ‘AI doomerism’ still exists, and a broader sense of making sure AI is deployed as safetly and with as many guard-rails as possible. Both by the tech companies themselves, and of course regulatory authorities EVERYWHERE.

But the needle has definitely shifted to ‘FOMO’ on a grand scale, both by companies and countries.

As the NY Times notes “In Race to Build AI, Tech Plans a Big Plumbing Upgrade”:

“The spending that the industry’s giants expect artificial intelligence to require is starting to come into focus — and it is jarringly large.”

“If 2023 was the tech industry’s year of the A.I. chatbot, 2024 is turning out to be the year of A.I. plumbing. It may not sound as exciting, but tens of billions of dollars are quickly being spent on behind-the-scenes technology for the industry’s A.I. boom.”

“Companies from Amazon to Meta are revamping their data centers to support artificial intelligence. They are investing in huge new facilities, while even places like Saudi Arabia are racing to build supercomputers to handle A.I. Nearly everyone with a foot in tech or giant piles of money, it seems, is jumping into a spending frenzy that some believe could last for years.”

“Microsoft, Meta, and Google’s parent company, Alphabet, disclosed this week that they had spent more than $32 billion combined on data centers and other capital expenses in just the first three months of the year. The companies all said in calls with investors that they had no plans to slow down their A.I. spending.”

“In the clearest sign of how A.I. has become a story about building a massive technology infrastructure, Meta said on Wednesday that it needed to spend billions more on the chips and data centers for A.I. than it had previously signaled.”

And investors both public and private are OK with that for now, despite uncertainties of how fast the hundreds of billions in investments worldwide will be recouped by customers both consumer and business.

As the WSJ notes in “Investors Cheer AI Spending Boom in Big Tech—just not at Meta”:

“The different reactions show how investors, one year into the AI boom, are becoming more discerning in how they interpret company spending and want to see a path to profit, said Rishi Jaluria, an analyst with RBC Capital.”

“There is more scrutiny placed on what a company’s AI strategy is,” he said. “If you don’t have a strategy and are spending a lot, then there is going to be concern.” 

“Tech companies are in the midst of an infrastructure build-out not seen since the dot-com days in an expensive race to create products and services that use artificial intelligence. Building to accommodate AI is costly because the new technology requires a lot more computing power, energy and pricey chips.”

And Governments around the world are joining the fray with the US encouraging chip companies to invest billions in Semiconductor manufacturing for the AI boom here, to China, the Mideast (UAE and Saudi Arabia in particular), Europe, Japan and many others aggressively focusing on AI investments and infrastructure within their borders.

I’m highlighting this distinct shift from ‘Fear of AI’ to ‘Fear of Missing Out’, because it’s so large and early in this AI Tech Wave vs other tech waves like PC, the Internet, and many others. Readers here know that I’m very optimistic about the net societal good over time from the AI Tech Wave. But I also consistently emphasize that progress is going to be lumpy and likely take longer than we all think.

Despite the extraordinary, exponential ‘AI Scaling Laws’ at work this time in both AI software and hardware. It will provide a lot of momentum and ultimately positive surprises where we’re going. But as we speed away from the extreme AI fears of last year, we do so with eyes wide open for now. That is the ‘Bigger Picture’ in AI this Sunday here. Stay tuned.

(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here)