Big tech meets big capex: How high can it go?
Big tech capex is set to jump over 50% in 2024, fueling the current AI boom, and supporting the training and deployment of the next-generation of frontier models slated for release over the next 2-4 months
If these frontier models can deliver greater capabilities, and the returns to match, it will intensify the race to scale up capex even further to train ever more powerful models on ever larger clusters of chips
If returns do not flow to the frontier, then models become commoditised, with all of big tech able to capitalise on their application layer dominance. If they do, then outcomes are uneven and uncertain with the core cloud players racing for dominance and leaving the others behind
Related reports
The new platform play: Meta gets specific about AI
2 August 2024Meta led the pack of tech results in Q2 with 22% growth and championing a suite of generative AI products; should these falter, Meta can recalibrate by devoting more of its AI infrastructure to core user and ad products.
AI and the metaverse give Meta an uncertain shot at a new platform play, leveraging its enormous user base and bringing developers back into the fold.
Reality Labs is still burning cash, but a collaboration with Ray-Ban offers a path to usable head-mounted displays, and could get Meta there faster than Apple’s cutting-edge approach.
OpenAI: Still leading the AI race?
23 July 2024The next generation of the largest and most powerful 'frontier' AI models will be a key test for the pace of AI progress, with OpenAI's upcoming GPT-5 the most highly anticipated.
For OpenAI, the stakes are high, facing a growing assortment of rivals and with huge spend on training and running models to recoup. Staying at the cutting edge is key to justifying itself to the big tech backers on which it depends.
If OpenAI can deliver technology that matches its ambitious vision for what AI can be, it will be transformative for its own prospects, but also the economy more broadly. Falling short could be fatal.
China's AI surge: Huawei puts its chips in play
18 March 2024The US is intent on preventing the CCP’s goal of AI supremacy by 2030, banning exports of advanced AI chips to Chinese companies. So far, these bans have largely been shrugged off to create a new commercial dynamic in the region.
Huawei wields a de facto monopoly on the manufacture and sale of advanced chips in China. Huawei also sells cloud services globally and threatens Apple's $70 billion in Chinese revenues through its premium handsets.
China’s AI regulation is highly supportive of the training and deployment of Chinese-language LLMs developed by tech platforms, startups, and device makers, with meaningful revenue gains only appearing by H2 2024.
Who wins from the AI boom: A dive into the value chain
13 March 2024Recent advances in 'Artificial Intelligence' have generated excitement, investment and improved valuations, on the plausible promise of greater efficiency in a range of areas, such as health and coding.
It is still not clear who will profit from this boom. Currently chip-maker NVIDIA is cleaning up, propelled by sales to model developers, also driving demand for cloud computing services.
Leverage in the AI value chain depends on differentiation and barriers to entry, which are high in the chips industry. AI services like chatbots have much lower barriers to entry, while deeper vertical integration of more stages of the value chain could shake things up.
Cloud and AI integration: Advantage Azure
31 October 2023Cloud revenues are reflecting patterns of AI integration. As big tech companies jostle for advantage, Microsoft and Azure claim an early lead
Cloud profits remain crucial for wider tech businesses, affecting ability to innovate
Strategies to develop and market cloud-based AI tools are diverging, with uncertainty rife. The ecosystem will shift as the demands of consumers and regulators becomes clearer
The new platform play: Meta gets specific about AI
2 August 2024Meta led the pack of tech results in Q2 with 22% growth and championing a suite of generative AI products; should these falter, Meta can recalibrate by devoting more of its AI infrastructure to core user and ad products.
AI and the metaverse give Meta an uncertain shot at a new platform play, leveraging its enormous user base and bringing developers back into the fold.
Reality Labs is still burning cash, but a collaboration with Ray-Ban offers a path to usable head-mounted displays, and could get Meta there faster than Apple’s cutting-edge approach.
OpenAI: Still leading the AI race?
23 July 2024The next generation of the largest and most powerful 'frontier' AI models will be a key test for the pace of AI progress, with OpenAI's upcoming GPT-5 the most highly anticipated.
For OpenAI, the stakes are high, facing a growing assortment of rivals and with huge spend on training and running models to recoup. Staying at the cutting edge is key to justifying itself to the big tech backers on which it depends.
If OpenAI can deliver technology that matches its ambitious vision for what AI can be, it will be transformative for its own prospects, but also the economy more broadly. Falling short could be fatal.
China's AI surge: Huawei puts its chips in play
18 March 2024The US is intent on preventing the CCP’s goal of AI supremacy by 2030, banning exports of advanced AI chips to Chinese companies. So far, these bans have largely been shrugged off to create a new commercial dynamic in the region.
Huawei wields a de facto monopoly on the manufacture and sale of advanced chips in China. Huawei also sells cloud services globally and threatens Apple's $70 billion in Chinese revenues through its premium handsets.
China’s AI regulation is highly supportive of the training and deployment of Chinese-language LLMs developed by tech platforms, startups, and device makers, with meaningful revenue gains only appearing by H2 2024.
Who wins from the AI boom: A dive into the value chain
13 March 2024Recent advances in 'Artificial Intelligence' have generated excitement, investment and improved valuations, on the plausible promise of greater efficiency in a range of areas, such as health and coding.
It is still not clear who will profit from this boom. Currently chip-maker NVIDIA is cleaning up, propelled by sales to model developers, also driving demand for cloud computing services.
Leverage in the AI value chain depends on differentiation and barriers to entry, which are high in the chips industry. AI services like chatbots have much lower barriers to entry, while deeper vertical integration of more stages of the value chain could shake things up.Cloud and AI integration: Advantage Azure
31 October 2023Cloud revenues are reflecting patterns of AI integration. As big tech companies jostle for advantage, Microsoft and Azure claim an early lead
Cloud profits remain crucial for wider tech businesses, affecting ability to innovate
Strategies to develop and market cloud-based AI tools are diverging, with uncertainty rife. The ecosystem will shift as the demands of consumers and regulators becomes clearer