David Cahn, a partner from Sequoia Capital, expressed concerns that the AI trend is becoming a bubble as continuous investments pour in. He predicts that AI investments will steadily increase. By the fourth quarter of 2023, it is estimated that NVIDIA will generate revenues of $50 billion per year from its data center side alone, exceeding expectations. Cahn anticipates NVIDIA’s data center revenues to continue growing to $150 billion annually due to the potential success of their Blackwell chips. With such significant investment values in mind, AI industry will require revenues of up to $600 billion per year to account for data center maintenance costs, software expenses, and profitability.
The current challenge lies in NVIDIA’s customers who, after purchasing chips, are significantly cutting prices themselves. The GPU market has now become a commodity that faces heavy price reductions, with new service providers expected to emerge continuously. Investments at this stage will depreciate over the next 3-4 years.
Cahn warns that AI investments are long-term commitments and cautions against getting caught up in the belief that instant riches will come from the development of AGI. Everyone vying for graphic chip supremacy is a race with an uncertain finish line.
Source: Sequoia
TLDR: David Cahn from Sequoia Capital warns of a potential AI bubble as investments surge, with NVIDIA expected to see significant revenue growth from their data center operations. Despite challenges in price reductions and market saturation, long-term AI investments require substantial revenues to cover costs and maintain profitability.
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