Infra Play #96: How AI fits the big picture of computing
It’s easy to forget the foundation that AI and Cloud adoption is built on
While we often focus on the short-term metrics of AI and cloud adoption, it’s important to pull back occasionally and look at the big picture of the last 10-20 years, as we transitioned toward strong adoption of technology across all parts of our lives. This process helps us qualify what the next tech sales opportunity can look like and whether AI is really the game-changer many believe it to be.
We will focus on the recent 340-page report by Bond Capital—an offshoot of the famous VC Kleiner Perkins that focuses on what they see as “blue-chip” tech companies that already have strong traction in their target markets. This is a selection of the type of companies they invest in, which overlaps with much of our focus here on cloud infrastructure software:
Source: Bond Capital
The key takeaway
For tech sales: AI adoption is accelerating aggressively in the first half of the year, with reasoning models leading to a significant increase in inference. This shouldn’t come as a surprise as we zoom out and look at this moment as part of a buildup of computing usage across the last few decades. The big question is not whether AI matters, but whether your company is able to offer an improved product for your core customer base.
For investors: In the last 4 years, we’ve seen the spectacular fall from grace of fundamental research, with the large-scale entry of retail investors into the market. Many of the biggest stock outperformers can be linked to retail interest, rather than the company offering exceptional value that was previously not priced in by the market. I think that this will start shifting in the next few years, particularly as we progress toward AGI, because we are going to start seeing more new products and inventions that “break the game” in their specific niche. Self-driving does that for the automotive industry; predictive protein synthesis achieves a similar shift for medical research. The obvious winners here will emerge in several years, but this is the time when those early bets are likely to put you in the right position ahead of the trend becoming obvious.
Slowly at first, then quickly
Source: Trends in Artificial Intelligence by Bond Capital
Trying to measure GDP growth is a difficult task, to say the least, but it is interesting to put into perspective how much growth we’ve seen in the last 30 years as connected computing (internet, followed by mobile and cloud) became the norm. Depending on the estimates, we are looking at close to doubling the world’s GDP in 30% of the time that we’ve had more advanced technology slowly permeate the economy.
Source: Trends in Artificial Intelligence by Bond Capital
As any new paradigm shift gets introduced, it takes a significant period for costs to go down quickly enough to allow for widespread adoption. AI inference is experiencing dramatically higher cost reduction, and much faster than anything we’ve seen before.
Source: Trends in Artificial Intelligence by Bond Capital
This is even more important when we account for the overwhelming growth that ChatGPT alone has had. This chart somewhat undersells the opportunity, since the expectation for OpenAI is to end up at between $10B and $15B in revenue by the end of 2025.
Source: Trends in Artificial Intelligence by Bond Capital
We are seeing a similar shift with physical AI, where working products are starting to capture a significant market share.