Analyst warns impact will be felt “in years, not quarters”.
Artificial intelligence has already experienced the full range of praise and criticism – from Bill Gates’ belief that the advent of ChatGPT is as significant as the invention of the internet, to contentions from leading AI experts that it could make humans extinct.
AI will, most experts agree, change the way we live, work and play. ChatGPT, the powerful AI bot which can hold human-like conversations and write effective and engaging content, is what many tech luminaries have called “the iPhone moment” for AI.
The world is now watching AI’s next steps with some of the big questions being: how will AI be monetised after that “iPhone moment” and what to make of Gates’ strong endorsement of AI’s ability to change the world after ChatGPT’s landmark arrival and impact. The key is that previous iterations of AI could read and write – but ChatGPT actually understands the content – and can generate it.
“The development of AI is as fundamental as the creation of the microprocessor, the personal computer, the Internet, and the mobile phone,” Gates wrote in a blog. “It will change the way people work, learn, travel, get health care, and communicate with each other. Entire industries will re-orient around it. Businesses will distinguish themselves by how well they use it.”
Milford Senior Analyst Daniel Wu is one of those closely watching AI’s progress in a ChatGPT world and, while he has no doubt of the significance AI will play in the future, one of his main messages is cautionary: it’s a long-term situation; don’t just get swept up in the hype.
Some of that hype has been caused by the value of some companies rising exponentially. US technology company Nvidia makes AI chips and other AI hardware and has seen its share price rise 165 per cent this year. That kind of rise calls to mind the dotcom boom and bust of the early 2000s – but Wu says AI is here to stay, though key questions remain.
“The benefits of generative AI will be felt over years, not quarters,” he says. “ChatGPT might have been an ‘iPhone moment’ – but the iPhone took 5-7 years to develop fully. Milford believes the risk is that the near-term benefits of generative AI are over-estimated and the long-term benefits are under-estimated.”
Nvidia, he says, has a 90 per cent share of the “training” market when it comes to AI. Players like Google, Microsoft, Meta, Amazon, and many others are investing heavily in building similar large language models to ChatGPT – where billions upon billions of words and meanings in many languages are used to “train” AI models, largely on Nvidia hardware.
However, when it comes to the “inferencing” market (the actual use of the AI model across many applications, potential and existing), Nvidia has less than 25 per cent share, says Wu. The big question it faces is sustaining growth as AI moves more into inferencing.
There is plenty of room for development of the future business and consumer use of AI – but no clear view yet of who might be at the forefront. One potential problem is commoditisation: “The issue is the data; most of it is derived from the same pool of publicly available data, which could lead to rapid commoditisation of these large language models.”
There could be, Wu says, a group of AI providers essentially offering much the same products and services – producing “table stakes”, the business term for the minimum entry requirement for a product or service.
Proprietary data is thus a key part of the development of AI into premium applications, as opposed to the “low hanging fruit” and “easy wins” of widely available AI applications. Premium applications will likely be seen in AI taking over some routine tasks in businesses and consumer-facing developments such as enhanced bots which make the consumer experience more enjoyable. The health sector is where the sophisticated use of data with AI could be most readily seen.
In the investment community, much focus often goes on identifying smaller companies which may make an AI breakthrough and thus have an Nvidia-style share price rise. But Wu says larger companies may not be disadvantaged in the race to monetise AI.
Larger companies have the deep pockets and the researchers who can make the next big breakthrough, he says, and those companies are adopting different strategies in pursuit of the next era of AI. Microsoft has made a clever move partnering with OpenAI; Meta may also be a big player “in a world where generating content – text, images, video – will be much easier. And where is it most likely to end up? Probably Facebook and Instagram.”
Google had been perceived as an “AI loser” initially but they are bringing out more AI products and have a strong AI strategy now. This shows it is worth keeping an eye on companies perhaps too hastily mislabelled.
“Because of the computational requirements and the task of building large language models for generative AI, it’s possible we will see the benefits accrue more identifiably to larger players,” Wu says.
As for the worldwide headlines and warnings from experts like Geoffrey Hinton, regarded as one of the fathers of AI, that AI could make humans extinct, Wu says his feeling is that the target is actually regulators.
“By their very nature, regulators are naturally slow and tend to lag behind the rapid pace of technology advances. So ethical and existential considerations and issues around regulation of AI are some of the challenges facing AI and investing in the AI space. Regulators will need to pick up their pace in confronting these challenges.”
“So I think it is important to have a long-term view and not to lose sight of that longer term,” says Wu. “It will be important to remain grounded and not just follow the hype – again, the real impact of AI will be felt over years, not quarters.”
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Disclosure of interest: Milford Funds Limited holds shares of Microsoft, Alphabet and Meta on behalf of clients.
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