Is the AI Hype over?

Is the #AI hype over? We’ve spent close to a trillion dollars on AI, and where’s the ROI? The revenue from ChatGPT subscriptions and similar services doesn’t come close to covering the investments. Yet, NVIDIA‘s stock is at an all-time high, and tech companies keep growing.

The screenshots are headlines from top capital allocators Sequoia Capital & Goldman Sachs. These two insightful articles dive into this issue:

1. Sequoia Capital’s “AI’s $600B Question”: Despite massive investments, a significant revenue gap persists, questioning AI’s long-term profitability. The future potential, like Nvidia’s B100 chip, must deliver substantial end-user benefits to justify costs.
https://lnkd.in/eEUVtDkq

2. Goldman Sachs’ “Gen AI: Too Much Spend, Too Little Benefit?”: Investments in generative AI are projected to exceed $1 trillion, but the tangible benefits remain uncertain. The hype needs to translate into real-world value to justify the expenditure.
https://lnkd.in/eB9KWV5m

There are a few trains of thought:
1. Build it, and they will come: Like many other investments (Cloud, Railroads, Broadband), the ROI needs to catch up. However, is this the proper cost for capital as capital investors now?

2. It’s an Arms Race: Similar to engineer hoarding in the past, we can’t let OpenAI beat us, so we have to do more, just like Google.

3. We Need to Invest Capital Somewhere and Believe in Something: We did it, let’s write it off and move on.

What are your thoughts on the current state of AI investment? Have you or your company had significant ROI in your AI investment?

Ciao for now,

Salim Gheewalla