Both Microsoft and Nvidia bet correctly to overtake Apple

Life comes at you fast.

Last month, artificial intelligence chip giant Nvidia briefly became the world’s richest company, overtaking Microsoft, which in turn had overtaken Apple.

When this news was mentioned on stage at a tech industry event I attended in Copenhagen, there was spontaneous applause from the audience.

As I write, Nvidia is now back in second place, after a fall in its share price reduced its combined value to $3 trillion (£2.4 trillion) compared to Microsoft’s $3.4 trillion.

Two things have propelled these two titans of American technology to such dizzying heights: AI and foresight.

Microsoft began investing in OpenAI, the creator of the popular AI chatbot ChatGPT, in 2019. Meanwhile, Nvidia boss Jensen Huang pushed his company into developing AI chips years before generative AI burst onto the scene .

Both firms took a long-term bet on the current AI boom — and so far, it’s paid off, leaving former top dog Apple behind. But how long will it last?

This year’s London Tech Week, an annual event for the UK tech scene, might as well have been called London AI Week. The letters AI were emblazoned on every stand and pronounced in every speech.

I bumped into Anne Boden, the founder of Starling Bank, an important fintech disruptor. She was buzzing with excitement.

“We thought we knew who the winners and losers were [in tech],” she told me. “But with AI, we’re rolling the dice again.”

She believes she is watching the artificial intelligence revolution re-landscape the tech sector and wants to dive back in.

That same week I also presented at the Founders Forum, an annual gathering of about 250 high-level entrepreneurs and investors. Some serious money, in other words. It’s a confidential event, but I don’t think I’ll have too much trouble saying that most of the conversation there was also centered around AI.

A few days after that, a headline in the Financial Times caught my eye. “Most of the stocks touted as winners from the AI ​​boom have fallen this year,” it read, claiming that more than half of the stocks in Citigroup’s “basket of AI winners” had fallen in value by 2024.

Life comes at you really fast.

“Given how high valuations have grown for tech companies, missteps forward could cause big swings in share prices,” warns Susannah Streeter, head of money and markets at investment firm Hargreaves Lansdown.

“Like the dot.com bubble, too much enthusiasm risks spilling over into disappointment.”

In 2023 you’d be forgiven for thinking that anything with the acronym AI in it was guaranteed to open up a lucrative layer of funding, with investment dollars pouring into all things AI.

My friend Saurabh Dayal, who is based in Scotland, identifies AI projects for his investment firm to potentially collaborate on.

He said he soon grew tired of the deceptive pitches.

“I spend a lot of time saying ‘…but that’s not AI,’” he tells me.

It seems that both investors and customers are finally getting wiser to the term AI, and, as a result, more selective.

Speaking to the FT, Citi’s Stuart Kaiser said that while AI remained a big topic in the world of stocks and shares, “Just saying 15 times the AI ​​will no longer break it.”

Additionally, there is a growing awareness of actual AI-generating products that don’t exactly live up to their hype. inaccuracies, misinformation, displays of bias, copyright infringement, and some content that is just plain weird.

And early AI-enabled physical devices like Rabbit R1 and Humane Pin have received bad reviews.

“We’re seeing the market around generative AI mature a bit now – early experiments set a lot of lofty expectations, but when the rubber hit the road there were a lot of unexpected results,” says Chris Weston, chief digital and information officer. technology services firm Jumar.

“Businesses have a lot of value attached to goodwill – the trust and comfort their customers have in their services. Introducing ungovernable chatbots is a step too far for many people right now.”

Technology analyst Paolo Pescatore agrees that the pressure is on for AI firms to deliver on their promises. “The bubble will burst the moment one of the giants doesn’t show any meaningful growth from AI,” he says.

But he doesn’t believe that will happen soon.

“Everyone is still jockeying for position and all companies are putting their strategies into AI,” he adds.

“All the players are ramping up their activities, increasing spending and claiming early successes.”

There is another reason why the AI ​​bubble may pop. It has nothing to do with the quality of the products or their market value. It’s whether the planet itself can handle it.

A study published last year predicted that the AI ​​industry could consume the same amount of energy as a country the size of the Netherlands by 2027 if growth continues at the current rate.

I interviewed Professor Kate Crawford from the University of Southern California for the BBC’s Tech Life podcast and she told me that the concern about the amount of electricity, energy and water required to power AI kept him awake at night.

Dr Sasha Luccioni from machine learning firm Hugging Face is also concerned.

“There just isn’t enough renewable energy to power AI right now — most of this bubble is fueled by oil and gas,” she says.

The hope is that the technology can be used to identify sustainability solutions, such as the secret to nuclear fusion, the way the sun gets its energy. But that hasn’t happened yet, and in the meantime, “AI systems put a huge strain on power grids that are already under a lot of strain,” adds Dr Luccioni.

With so much uncertainty, few should bet against another shake-up among the world’s richest firms. But currently, Apple has a fight on its hands to catch Microsoft and Nvidia in the AI ​​race.