We just saw another “vendor financing deal” in the Artificial Intelligence space between Nvidia Corp. (NVDA) and Open AI. It has the names Lucent and Nortel ringing in my ear from the days when they announced similar deals with customers in the late 1990s – except the ones being announced now are so much bigger in terms of dollars, notes Peter Boockvar, editor of The Boock Report.
With the other massive agreements Open AI is announcing, including the previous $300 billion one with Oracle Corp. (ORCL), Open AI in a way is now “too big to fail” for the sake of the GenAI data center buildout. For this whole massive experiment to work without causing large losses, Open AI and its peers now have got to generate huge revenues and profits to pay for all the obligations they are signing up for – and at the same time provide a return to their investors.
Nvidia Corp. (NVDA)
Bain doesn't think it's going to happen anytime soon. While I haven't seen their actual piece, I saw a Bloomberg News story that summarizes it. It’s titled “An $800 Billion Revenue Shortfall Threatens AI Future, Bain says.” The piece goes on to read:
“By 2030, AI companies will need $2 trillion in combined annual revenue to fund the computing power needed to meet projected demand...Yet their revenue is likely to fall $800 billion short of that mark as efforts to monetize services like ChatGPT trail the spending requirements for data centers and related infrastructure, Bain predicted.”
Meanwhile, I've argued that US tech has a competitor now – one the likes of which they have never seen. That is China. Putting aside our enabling of it in part because we inhibited their access to our best technology, Bloomberg also just published an interesting piece titled “Huawei Plans Three-Year Campaign to Overtake Nvidia in AI Chips.” It said: “Huawei on Thursday took the rare step of publicizing a three-year vision for eroding Nvidia's dominance in the AI boom.”
Doubt China's capabilities at your own risk.
