2-minute read
Are you familiar with these hunky gentlemen?
The Beach Boys?
They’re Bob Kahn and Vinton Cerf. You can thank them for inventing the internet.[1]
Thank them or ask them for years of my life back?
In the mid-1970s these fellas devised a way for computers to communicate with one another. This paved the way for the World Wide Web in 1991, the first internet browser a year later, and eventually the creation of social media in the early 2000s.
Don’t make me pull out the sleeping high chair picture…
Okay, okay! The point is that it took several decades for the internet to round into the life altering form we know it today.
Is that the end of the story…?
Far from it. This may explain what’s next:
A quarter-trillion seems like a big number.
It’s very big. Microsoft alone is expected to spend roughly $20 billion on AI in 2025. To put that into perspective, Eli Lilly spent a total of $3.45 billion in 2023.[2] Lilly is a top-15 most valuable company in the world who’s frantically pumping out as many weight loss drugs as possible.
Where’s all this AI money going?
Some of it is going to data center buildouts, some to human capital, and a whole lot to a company in Santa Clara, California:
Did you know I never heard of Nvidia until about a year ago?
Honestly, it makes two of us. And now it’s worth $3 trillion or what you could call the most valuable publicly traded company in the world.
So let me connect some dots: Big Tech – Microsoft, Meta, Google, Amazon – are pouring gazillions of dollars into AI. A significant portion of these dollars are going to Nvidia. Big Tech needs to see a return on this investment, but Nvidia also needs them to keep on buying their semiconductor chips for its own wellbeing. Do I have that right?
Pretty much.
Sounds pretty…incestual.
Many others would agree.
So where do we go from here?
That’s what I’d consider the biggest question going into 2025 is: when will the stock market need to see a return on AI investments?
And your answer?
I don’t know but I am skeptical it will come in 2025.
I don’t know either but the stock market may depend on it.
It just may. Keep in mind that Big Tech is still in very strong shape with profit margins continuing to grow. However, the bill for this AI spending orgy will come due eventually.
Meaning what exactly?
It means that AI will need to show real promise. It will need to make an internet-sized impact on society.
You’re telling me chat bots teaching me how to grill a tomahawk ribeye aren’t cool?
They’re cool, but not a quarter-trillion dollars cool. I’m hoping AI in 2024 is walking so it can run in 2025. Call me a doubter but let’s see how it plays out.
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[1] Other figures contributed to the modern day form of the internet. However, Kahn and Cerf are widely recognized due to their invention of the TCP/IP communication method.
[2] Source: https://investor.lilly.com/static-files/b5c56281-bc31-48c3-9e63-5e6cd588dff5