Gonna have to come back to this when my brain turns on 🤣
Really appreciate stepping through how you approach valuing OpenAI. I’d love a post for a generic method on valuing companies, maybe some tidbits of personal experience tossed in.
I don’t think the future of AI is overhyped, the money probably just isn’t going to flow like it’s been hyped. I went back and looked at QQQ’s history and was kinda stunned that the dotcom peak wasn’t met again until 2011 or so. But after some thought, I think that was reasonable. Smartphones didn’t really cement themselves into every day life until 2010 or so.
So, we’re all those investors wrong about the revolutionary impact of the internet? Or were they all too early? Too early for us to know the impact, too early for companies to learn how to monetize the internet, too early to know how consumers would respond ($$$)?
I think AI is in a somewhat similar place (history rhymes), except we have a small history of learning how to monetize and develop SaaS. Of course much of the AI boom is lead by real money flows to NVIDIA, but we’re yet to see if the money spent on AI pulls more money from consumers. Should be coming soon….i think google et al earnings are coming late aug.
I think most tech companies have a clear idea of how to improve their products with AI, I don’t think they have a clear idea of how it increases revenue or profit though. I think everyone just doesn’t want to be last to the AI party, and that’s super understandable.
My guess is…no long lasting significant increase in sales for things like smartphones and personal devices that will actually bring AI into our lives. Probably a significant but temporary “upgrade” bump in sales as people want to try it out.
I think it’s much more likely AI saves costs in areas like call centers and alleviating mundanity from more complex roles.
I think that will take some time to really be appreciated, and is also very “unsexy” and not what everyone is looking for in all this hype.
These are my personal thoughts and not tied to any real research. I come here for research 😅
AI will actually cost a lot of SaaS companies MORE money though (i.e. decrease margins). They are competing with each other to provide AI to stay relevant, but it isn't increasing their ability to charge or their total user numbers. Google has had this problem for years—the more AI they've incorporated, the more expensive it's been to service each search request. Their margin has been decreasing for years. One of the reasons Google jumped so much in valuation last quarter was because they finally reversed that trend somewhat.
For AI... I'd say this likely will happen after this specific cycle, but the more interesting things will happen when it touches real world more—so less ChatGPT, and more materials design and driving robotics.
Way cool, thanks James. I’ll give that a read later tonight.
Boy that’s funny then, the more AI they add the harder it makes it on them, and the less people seem to like it. TAKE A HINT haha very cool for sharing, thank you
and AI future is fascinatingly scary to me. It feels like jet fuel on humanity, or dystopia. Stay tuned to find out 👁️👄👁️
I guess that’s why we fear volatility in life, it feels like realizing reality can suddenly shIFT
"""AI will actually cost a lot of SaaS companies MORE money though (i.e. decrease margins). They are competing with each other to provide AI to stay relevant, but it isn't increasing their ability to charge or their total user numbers. Google has had this problem for years—the more AI they've incorporated, the more expensive it's been to service each search request. Their margin has been decreasing for years. One of the reasons Google jumped so much in valuation last quarter was because they finally reversed that trend somewhat."""
I haven't followed Google at all, thank you for the insight. I think that's exactly what I'm imagining - they're trying to use AI but have no real experience to know what works...because no one does xD
I'm looking at your stylized chart, and I like it a lot. My take is NVIDIA stock is in the Hype phase but skittish now, because everyone's looking at tech to see where Real Potential, where that cross over point, actually lies.
Gonna have to come back to this when my brain turns on 🤣
Really appreciate stepping through how you approach valuing OpenAI. I’d love a post for a generic method on valuing companies, maybe some tidbits of personal experience tossed in.
I don’t think the future of AI is overhyped, the money probably just isn’t going to flow like it’s been hyped. I went back and looked at QQQ’s history and was kinda stunned that the dotcom peak wasn’t met again until 2011 or so. But after some thought, I think that was reasonable. Smartphones didn’t really cement themselves into every day life until 2010 or so.
So, we’re all those investors wrong about the revolutionary impact of the internet? Or were they all too early? Too early for us to know the impact, too early for companies to learn how to monetize the internet, too early to know how consumers would respond ($$$)?
I think AI is in a somewhat similar place (history rhymes), except we have a small history of learning how to monetize and develop SaaS. Of course much of the AI boom is lead by real money flows to NVIDIA, but we’re yet to see if the money spent on AI pulls more money from consumers. Should be coming soon….i think google et al earnings are coming late aug.
I think most tech companies have a clear idea of how to improve their products with AI, I don’t think they have a clear idea of how it increases revenue or profit though. I think everyone just doesn’t want to be last to the AI party, and that’s super understandable.
My guess is…no long lasting significant increase in sales for things like smartphones and personal devices that will actually bring AI into our lives. Probably a significant but temporary “upgrade” bump in sales as people want to try it out.
I think it’s much more likely AI saves costs in areas like call centers and alleviating mundanity from more complex roles.
I think that will take some time to really be appreciated, and is also very “unsexy” and not what everyone is looking for in all this hype.
These are my personal thoughts and not tied to any real research. I come here for research 😅
Good points here—I agree and do actually lay out some of the comparisons with the Dot Com boom in one of the links: https://weightythoughts.com/p/when-the-ai-bubble-bursts
AI will actually cost a lot of SaaS companies MORE money though (i.e. decrease margins). They are competing with each other to provide AI to stay relevant, but it isn't increasing their ability to charge or their total user numbers. Google has had this problem for years—the more AI they've incorporated, the more expensive it's been to service each search request. Their margin has been decreasing for years. One of the reasons Google jumped so much in valuation last quarter was because they finally reversed that trend somewhat.
For AI... I'd say this likely will happen after this specific cycle, but the more interesting things will happen when it touches real world more—so less ChatGPT, and more materials design and driving robotics.
Way cool, thanks James. I’ll give that a read later tonight.
Boy that’s funny then, the more AI they add the harder it makes it on them, and the less people seem to like it. TAKE A HINT haha very cool for sharing, thank you
and AI future is fascinatingly scary to me. It feels like jet fuel on humanity, or dystopia. Stay tuned to find out 👁️👄👁️
I guess that’s why we fear volatility in life, it feels like realizing reality can suddenly shIFT
"""AI will actually cost a lot of SaaS companies MORE money though (i.e. decrease margins). They are competing with each other to provide AI to stay relevant, but it isn't increasing their ability to charge or their total user numbers. Google has had this problem for years—the more AI they've incorporated, the more expensive it's been to service each search request. Their margin has been decreasing for years. One of the reasons Google jumped so much in valuation last quarter was because they finally reversed that trend somewhat."""
I haven't followed Google at all, thank you for the insight. I think that's exactly what I'm imagining - they're trying to use AI but have no real experience to know what works...because no one does xD
I'm looking at your stylized chart, and I like it a lot. My take is NVIDIA stock is in the Hype phase but skittish now, because everyone's looking at tech to see where Real Potential, where that cross over point, actually lies.