How Microsoft and Nvidia Bet Right to Leap Apple

Last month, AI chip giant Nvidia briefly became the world’s richest company, overtaking Microsoft, which in turn overtook Apple.

When this news was mentioned on stage at a tech industry event I attended in Copenhagen, the audience erupted in spontaneous applause.

As I write, Nvidia is now back in second place after a fall in its share price reduced its combined value to 3tn (2.4tn) compared to 3.4tn for Microsoft.

Two things have driven these two American tech titans to such dizzying heights: AI and foresight.

Microsoft began investing in OpenAI, the creator of the popular AI chatbot ChatGPT, back in 2019. Meanwhile, Nvidia boss Jensen Huang had been pushing his company to develop AI chips for years before generative AI exploded onto the scene.

Both companies have long bet on the current boom in artificial intelligence – and so far it has paid off, so the former top dog Apple remains behind them. But how long will it last?

This year’s London Tech Week, the annual event for the UK technology scene, might as well have been called London AI Week. The letters AI were emblazoned on every stand and pronounced in every speech.

I bumped into Anne Boden, founder of Starling Bank, a major fintech disruptor. She was buzzing with excitement.

“We thought we knew who the winners and losers were [in tech],” she told me. “But with artificial intelligence, we’re rolling the dice again.”

He believes he’s watching the AI ​​revolution reshape the tech sector and wants to dive back in.

That same week, I also appeared at the Founders Forum, an annual gathering of about 250 high-level entrepreneurs and investors. Some serious money, in other words. It’s a confidential event, but I don’t think I’ll get in too much trouble if I say that a lot of the chat was also focused on AI.

Life comes at you really fast.

“Given how high valuations have jumped for tech companies, missteps going forward could cause big swings in share prices,” warns Susannah Streeter, head of money and markets at investment firm Hargreaves Lansdown.

“As with the dot.com bubble, over-enthusiasm risks turning into disappointment.”

In 2023, you’d be forgiven for thinking that anything containing the acronym AI was guaranteed to open up lucrative funding, with investment dollars flooding into all things AI.

My friend Saurabh Dayal, who is based in Scotland, is identifying AI projects for his investment firm to potentially collaborate on.

He said he soon tired of the misleading pitches.

“I spend a lot of time saying ‘…but that’s not AI,'” he tells me.

It seems that both investors and clients are finally getting wiser to the concept of AI and, as a result, more selective.

Additionally, there is growing awareness of current generative AI products that don’t exactly live up to their own hype. Inaccuracies, misinformation, bias, copyright infringement, and some content that’s just plain weird.

And early physical AI devices like the Rabbit R1 and Humane Pin received poor reviews.

“We see the generative AI market maturing a bit at the moment – ​​early experiments set a lot of high expectations, but when the rubber hit the road, there were too many unexpected results,” says Chris Weston, director of digital and information technology. technology service company Jumar.

“Businesses have a lot of value in goodwill – the trust and comfort their clients have in their services. The introduction of uncontrollable chatbots is currently too far for many.”

Tech analyst Paolo Pescatore agrees that AI firms are under pressure to deliver on their promises. “The bubble will burst the moment one of the giants shows no meaningful growth from AI,” he says.

However, he does not believe that this will happen in the foreseeable future.

“Everyone is still fighting for position and all companies are fixing their strategies on AI,” he adds.

“All the players are strengthening their activities, increasing their spending and claiming their first successes.”

There is another reason why the AI ​​bubble could burst. It has nothing to do with the quality of the products or their market value. The question is whether the planet itself can afford it.

A study published last year predicted that the AI ​​industry could consume the same amount of energy as a country the size of the Netherlands by 2027 if growth continues at its current rate.

I interviewed Professor Kate Crawford from the University of Southern California for the BBC’s Tech Life podcast, and she told me that concerns about the amount of electricity, energy and water needed to power AI keep her up at night.

Dr Sasha Luccioni of machine learning firm Hugging Face is also concerned.

“There’s just not enough renewable energy to power AI right now—most of this bubble is fueled by oil and gas,” he says.

The hope is that this technology could be used to identify solutions to sustainability, such as the mystery of nuclear fusion, the way the sun gets its energy. But that hasn’t happened yet, and in the meantime, “AI systems are putting a lot of strain on energy networks that are already under enormous pressure,” adds Dr Luccioni.

With such uncertainty, few should bet on further upheavals among the world’s richest firms. However, Apple currently has a fight on its hands to catch up with Microsoft and Nvidia in the AI ​​race.