Is the AI opportunity comparable with other recent tech trends?

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    The only constant in technology is change. But while some innovations, such as smart devices and e-commerce, have redefined the way both consumers and businesses use technology, others, such as 3D printing and the Metaverse, have so far It doesn’t live up to the hype. The artificial intelligence (AI) revolution is in its early stages, so it’s natural to wonder whether AI can deliver on its promise and whether it compares to other recent technology trends.

    There are some similarities between the current AI opportunities and those created by the rapid growth of smart devices (including smartphones and tablet PCs) in the 2010s.

    Innovation has been driven by simple devices and applications. Smart devices have been around since 2004, but the introduction of the iPhone in 2007 is considered a game-changer, captivating millions of users thanks to its simple touch-screen user interface. Masu. And with the introduction of the App Store in 2008, demand for smart devices exploded, driving many app-based business models such as mobile payments, social networking, and ride-sharing.

    Similarly, while AI has been around for some time, the introduction of ChatGPT in late 2022 was a turning point. In fact, we call ChatGPT the “iPhone Moment” of AI. It has helped reshape the use of online search and other interactions due to its simple user interface, attracting millions of users to generative AI in just a few months. In our view, the release of CoPilot and other enterprise applications with advanced automation is an “App Store” moment, as we believe many new business models centered around AI will soon emerge. This gives us confidence that AI, like smart devices, is a sustainable trend with strong medium- to long-term prospects.

    We believe revenues could jump more than 10x in addressable markets. Based on company reports and data from Bloomberg Intelligence, the smart device industry generated nearly US$50 billion in revenue in 2009 and exceeded US$600 billion in 2017, representing almost 12x growth in eight years. Masu. Many technology trends have emerged over the past decade, but we believe that only AI can match the more than 10x growth potential of smart devices at such a large scale. . AI industry revenue is expected to increase from US$28 billion in 2022 to US$300 billion in 2027.

    Investments from major companies have created a strong ecosystem. Smart devices and AI stand out from other technology trends because they are attracting significant investment from a very early stage. For example, trends such as 3D printing and the Metaverse remain niche areas with selective investments, while “mobility” trends using smart devices and “automation” trends using AI are becoming ubiquitous. It attracts billions of dollars of investment from major corporations. This also includes companies outside the technology sector. This effort has helped build a robust ecosystem and has attracted hundreds of thousands of developers to build applications that further support our high recurring revenue model.

    Further consolidation in the technology industry seems likely. While smart devices have generated solid wealth for investors, including those in the supply chain, over the past decade, their rise is also reinforcing a “winner-takes-all” trend in which industry profitability is dominated by a few companies. promoted. We believe that AI will support a new wave of integration in technology, thereby making the big things even bigger. However, this does not mean that only the leading companies in technology benchmarks may be in a favorable position. Our view is that AI leaders in industries with strong first-mover advantages in AI and deep pockets that can support investments in capex-intensive industries like AI should benefit. Thing. As a result, AI industry leaders and their smaller peers that can disrupt many traditional business models should be the primary beneficiaries of the AI ​​era. This is similar to how smartphone companies benefited platform companies that amassed millions, if not billions, of users.

    All of this together suggests that AI has long-term potential that exceeds the opportunities created by the smart device trends of the past decade. We believe the potential annual AI chatbots and applications could soon exceed 10 billion units.

    However, even after the summer reset, AI stocks do not feel cheap. We have a neutral view of the global technology sector as a whole. Within this sector, we believe software and internet stocks currently offer a more attractive risk-reward balance, and these stocks are well-positioned to ride the growing AI demand trend. That’s what I think.

    Read the latest CIO report to learn more. “TechGPT Overview” (published October 13, 2023), by Sundeep Gantori, Delwin Kurnia Limas, Bennett Chu, and Kevin Dennean.


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