Some Thoughts on the AI Boom, Silicon, and the Year Behind & Ahead

The News: With the advent of ChatGPT in late 2022, the trajectory of innovation and widespread AI implementation has taken an unexpected turn since OpenAI released ChatGPT into the wild. You can read and comment on these musings here.

Some Thoughts on the AI Boom, Silicon, and the Year Behind & Ahead

Analyst Take: It is fascinating to witness the early stages of AI development, where debates about winners and losers in the AI landscape abound. Companies are being declared as either holding a prominent and crucial role in AI or already written off without a chance to compete. However, the reality is that we are still in the early phases—akin to the first innings, first quarter, first half, or even the pregame. In some cases, one might argue that the game has not truly begun yet.

Recent weeks have seen a remarkable series of innovations in silicon, promising significant changes in the data center, devices, and the overall competitive landscape. These innovations are poised to introduce meaningful competition in the field of AI.

Reflecting on a MarketWatch piece from November 2020, I predicted NVIDIA would become the next trillion-dollar tech company, anchored in the potential acquisition of ARM. Although the ARM deal did not materialize, the trillion-dollar valuation prediction came true in 2023 due to accelerated computing and the surging demand for training large language models (LLMs). The underlying catalyst was the evolution of systems architecture, with accelerated computing leading to more productive and efficient enterprises. NVIDIA, being at the forefront of this opportunity, experienced substantial growth and record results.

As the industry evolves rapidly, there are signs of increased competition. In the coming year, contenders such as Intel Corporation, AMD, Amazon Web Services (AWS), Google, Microsoft, Broadcom, and various startups (including Groq, SambaNova Systems, Graphcore, etc.) are expected to bring forth new designs and architectures, shifting the focus beyond GPUs to include more efficient but less flexible ASICS.

While the allure of predicting industry winners and losers captivates attention, it is crucial to recognize the multitude of competitors and factors such as innovation, investment, economics, politics, and policies that will collectively shape the industry’s future. There will not be one winner. Not for LLMs, not for GPUs, not for ISVs. There will be many, and for business, consumers, and the economy, this is a good thing.

Looking ahead to 2024, at The Futurum Group, we anticipate heightened competition ushering in new products, margin compression, elevated software layers of abstraction, and cloud AI solutions from hyperscalers with homegrown silicon. Offerings from AMD and Intel are expected to be both competitive and exciting, contributing to a positive landscape for the industry. In just the past 2 weeks at Intel’s AI Everywhere and AMD’s Advancing AI events, we saw massive progress made in competitive designs as well as software innovation that will open up the market.

In 2019, I highlighted the trend that silicon would “eat the world.” This foresight remains relevant as we witness the fast-paced innovation from semiconductor companies driving efficient and powerful designs, not only in data centers but also across PCs, automotive, manufacturing, and more. If we look at the advancements of intelligent vehicles powered by software and now the AI PC market, which is set to be the next super cycle for PCs, we are seeing a paradigm shift powered by silicon disrupting industry by industry at a breakneck pace.

The year 2024 is poised to be one of the most exciting for innovation, as AI investments proliferate into the economy. Companies will grapple with implementing and scaling AI, fostering competition and bringing diverse solutions to the market. This increased competition should lead to better economics and greater democratization of AI technology.

However, challenges such as sustainability, security, and privacy will persist, prompting ongoing debates on global policies governing AI development, regulation, and monitoring. The advent of alliances such as the Meta–IBM led AI Alliance that was recently announced is a good example of the industry coming together to address these challenges with hundreds of organizations joining the group. The AI Act of the EU is an early example of how global leaders are trying to address the proliferation in parts of the world giving a framework—leaving questions of how regional approaches can support technology proliferation that genuinely knows no borders. Despite these challenges, the trajectory of technological advancement appears poised to accelerate, making the future of the technology industry both faster and more exciting. I eagerly anticipate tracking, synthesizing, and debating the unfolding developments in the years ahead.

Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.

Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.

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