$157bn last October<\/a>, while Anthropic almost trebled its valuation recently, going from $60bn in March to $170bn last month. Anderson said the scale of the value increases \u201cdid bother me\u201d. OpenAI reportedly posted revenue of $4.3bn in the first half of this year, with an operating loss of $7.8bn, according to tech news site The Information.<\/p>\nRecent share price swings have also jolted seasoned market watchers. For instance, AMD briefly gained $80bn in valuation during stock market trading on Monday after the OpenAI announcement, while Oracle \u2013 a beneficiary of demand for AI infrastructure such as datacentres \u2013 gained about $250bn in one day in September after announcing better than expected results.<\/p>\n
There is also a huge capital expenditure boom, which refers to spending on non-staff costs such as buildings and equipment. The big four AI \u201chyperscalers\u201d \u2013 Facebook parent Meta, Google owner Alphabet, Microsoft and Amazon \u2013 are expected to spend $325bn on capex this year, roughly the GDP of Portugal.<\/p>\n
Is AI adoption justifying investor excitement?<\/p>\n
Faith in the AI boom was rattled in August when the Massachusetts Institute of Technology published research showing that 95% of organisations are getting zero return from their investments in generative AI. The study said the issue was not the quality of the models but how they were used. It said this was a clear manifestation of the \u201cgenAI divide\u201d, with startups led by 19- or 20-year-olds reporting a jump in revenues from deploying AI tools.<\/p>\n
The report coincided with a heavy fall in AI infrastructure stocks such as Nvidia and Oracle. It came two months after McKinsey & Company, the consulting firm, said eight out of 10 companies report using genAI, but the same proportion report no significant impact on their bottom line. McKinsey said this is because AI tools are being used for broad purposes such as producing meeting minutes and not specific purposes such as highlighting risky suppliers or generating ideas.<\/p>\n
All of this unnerves investors because a key promise from AI companies such as Google, OpenAI and Microsoft is that if you buy their tools, they will improve productivity \u2013 a measure of economic efficiency \u2013 by helping a single employee produce much more economically valuable work in an average working day.<\/p>\n
However, there are other clear indications of a widespread embrace of AI. This week, OpenAI said ChatGPT is now used by 800 million people a week, up from the figure of 500 million cited by OpenAI in March. Sam Altman, OpenAI\u2019s chief executive, firmly believes that demand for paid-for access to AI is going to continue to \u201csteeply increase\u201d.<\/p>\n
What does the bigger picture show?<\/p>\n
Adrian Cox, a thematic strategist at the Deutsche Bank Research Institute, says the current situation feels like \u201cwe are at a crossroads where the lights are flashing different colours.\u201d<\/p>\n
The red lights, he says, are enormous capital expenditure where \u201cthe current generation of chips could be outdated before the investment pays off\u201d and the soaring valuations of private companies such as OpenAI.<\/p>\n
The amber signals are a more than doubling of the share prices of the \u201cmagnificent seven\u201d US tech stocks. This is offset by their price to earnings ratios \u2013 a measure of whether a stock is under- or overvalued \u2013 which are below historical levels seen by other tech firms in the dotcom bubble of 2000. Cox also advises keeping an eye on the \u201ccomplicated investment structures\u201d seen in recent supplier\/customer deals.<\/p>\n
Cox adds that, on the green light side, a lot of the AI investment is from well-established, well-capitalised companies such as Alphabet, Meta, Amazon and Microsoft, mostly funding expenditure from their own free cashflow.<\/p>\n
He adds: \u201cWe are only scratching the surface in terms of the technology\u2019s capabilities and there is much more road ahead in terms of companies adopting AI.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"There are always points in financial booms when market commentators ask if exuberance has got out of hand.…\n","protected":false},"author":2,"featured_media":197469,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[256,254,255,64,63,105],"class_list":{"0":"post-197468","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-artificialintelligence","11":"tag-au","12":"tag-australia","13":"tag-technology"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/197468","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=197468"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/197468\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/197469"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=197468"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=197468"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=197468"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}