AI illusions and navigating The Money Trap with Alok Sama | Equity Podcast
14 Sep 2024 (4 days ago)
AI Investments and Productivity
- Wber Pinkas is investing in AI that is applied to their portfolio companies and seeing productivity improvements, such as a telecom company cutting customer service costs by 30%.
- At the consumer level, AI is in its early stages, with no apps yet demonstrating the radical impact that some experts predict.
AI Chip Development
- Arm Holdings designs energy-efficient chips, which will be increasingly important for AI applications on smartphones and cars, while Nvidia focuses on powerful chips for data centers used by companies like Microsoft and Google.
- Nvidia's current performance is not disconnected from reality, with its revenue and profits growing and its forward earnings multiple at 35 to 40 times, which is not considered outrageous.
OpenAI Funding
- OpenAI, with a revenue run rate of approximately 3.5 billion, has a potentially circular funding situation where investments from Microsoft and Nvidia could indirectly flow back to them through OpenAI's spending on cloud computing and AI chips.
- While there are concerns about potential overinvestment in the AI sector, particularly in the private market, it is argued that the risk of underinvestment is a greater concern, with companies like Microsoft and Google making significant investments in data centers.
Overinvestment in AI
- Microsoft is used as an example of a company that can afford to over-invest in artificial intelligence.
- The number of IPOs has decreased significantly from 2021 to 2023, going from over 1,000 to 150.
High Valuations and IPOs
- High valuations during fundraising can make it difficult for companies to go public or get acquired later on.
- Masayoshi Son, despite having a reputation for large investments, passed on an opportunity to invest in Facebook at a $1 billion valuation.
Masayoshi Son's Investment Strategy
- Masayoshi Son, recognizing the potential of TikTok's AI engine and its disruptive nature in the social media landscape, invested in the company at a $75 billion valuation.
- Traditional financial metrics, such as discounted cash flow analysis, may not be suitable for evaluating transformative technologies, as exemplified by Masayoshi Son's investment approach.
AI as a Productivity and Entertainment Tool
- Alok Sama believes that setting the bar for machines higher than for humans is ironic, using the example that he would trust a machine to drive better than himself in certain situations.
- Sama believes that AI can be a productivity tool at both the enterprise and individual levels, as well as an entertainment tool.