AI Sparks Competition, Reshapes Tech Industry Dynamics

I mean, AI to me is really will be the defining Technology of my life, I would have said that was going to be internet and wireless phone, they were great, they were amazing cycles, and in some ways they enabled a lot of this, but AI is going to be really something that changes society profoundly. What I find really fascinating about AI is... You know, we built these monopolies and the Amazons and Googles and Metas and Apples, and we built these monopolies over a long period of time.

And those monopolies we struggled with as a society to regulate.

Because a lot of the technologies that those monopolies bring are good for consumers. Amazon same-day shipping is not bad for me, right? Google free search is not bad for me, right? What's amazing is those companies got so successful and they had so much monopoly power that they went and invented AI and they screwed it up for themselves, right? 

And so what I mean by that is AI has led us to a place where these companies are now competing. And it's a beautiful thing, right?

It's a beautiful thing for investors because... These companies now have to duke it out. Google is afraid of ChatGPT disrupting search. Apple's afraid of ChatGPT inventing some new interface for consumers. 

Oracle suddenly is a cloud competitor with AWS. Out of nowhere.

Nvidia is now the biggest company in the world and it's driving all this innovation in semiconductor technology.

Companies that were sort of left for dead. Optical components or transceiver companies or or some kind of special semiconductor company that really was left for dead for a long time, suddenly their technology is critical and urgent for these large companies to invest in.

So I love that about the change that AI has driven because it's opened the field for us.

Now, I think what we see is the mega cap companies, the hyperscalers in particular, they do have a bit of a challenge here because their returns are declining as their markets become more competitive.

And then the beneficiaries around the world are the companies that suddenly there's a sense of urgency to buy the leading cutting edge high bandwidth memory, right?

If you don't have the high bandwidth memory, you can't have the best LLM.And if you can't have the best LLM, then Meta can't beat Google, can't beat OpenAI. 

And so the value, the urgency and the value shifts a different part of the supply chain. 

So I think there's pretty clearly a pressure on returns at hyperscalers and an improvement in returns in a lot of the areas around the supply. in large part, that's to the companies that have unique technological advantages that are capitalizing on the urgency of competition between these hyperscalers.