The best investors are customers. When a company becomes a category-king, those customers could also become super-investors. Simply, companies which define new paths, typically orthogonal to whatever others are doing, creating a new basis of competition, have friends. ChatGPT’s OpenAI is having a moment, validating those ancient words – “victory has relations while vanquish is an orphan”.
Indeed, when Microsoft has shipped to you truckloads of money, and Apple and Nvidia are knocking, you are indeed victorious: “The world’s biggest tech companies, including Apple and Nvidia, have been in discussions about investing in OpenAI…The maker of ChatGPT is looking to raise “several billion dollars” in a new funding round that values it at more than $100 billion”.
Google, Amazon, Facebook’s Meta and OpenAI [the AI Utilities] are fighting for the soul of generative AI. In other words, America owns the productive element of this new sector. Others in the world, outside China, will focus on consumerism. Europe, among other things, will be the referee as the regulator! When all is done, the AI Utilities will become like your electricity and water boards, supplying you everything AI, at home and office.
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Good People, remember that in the last 40 years, IBM, despite its technology heritage, has never crossed the $200b market cap. But Nvidia is valued at about $3 trillion. This will give you a good idea why this play of $billions could be necessary.
If Nvidia invests in OpenAI which uses its AI accelerators and broad hardware, it will create a market for itself. But if it keeps that money and Google takes down OpenAI, and Google is not using Nvidia chips at scale, Nvidia will obey gravity on its market cap.So, these investments are not necessarily about making money via OpenAI market appreciation, but creating markets and distribution channels for their products. You get it – self-preservation.
Looking at this from an engineering angle, the real winner is Nvidia because OpenAI cannot advance faster than Nvidia can, since Nvidia chips power OpenAI, and if Microsoft and Apple are uniting to support OpenAI, Nvidia can have a longer lunch!
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What Nvidia is doing with OpenAI is like a brewery investing/supporting bars, the more people visit the bars to drink, the more the supply from the brewery. It’s self-reinforcing. When you have the biggest of them all – Apple, Nvidia and Microsoft coming to your party, the music is not stopping soon. It means that you are part of the big league.
The US has pretty much cornered the productive elements of the Generative AI, others who still think they are coming in as players and gladiators will be reduced to consumers and spectators. Therein lies the danger of helping to hype what you are not part of the core.
As often is the case, the game is won before it even kicks off. When you are done sleeping on the bicycle, you are left with cleaning up the party venue.