How Microsoft and Nvidia bet to get ahead of Apple

Last month, AI chip giant Nvidia briefly became the world’s richest company, surpassing Microsoft, which had in turn overtaken Apple.

When this news was announced on stage at a tech industry event I attended in Copenhagen, there was spontaneous applause from the audience.

As I write, Nvidia is back in second place, after a fall in its share price brought its combined value down to $3 trillion (£2.4 trillion), compared to Microsoft’s $3.4 trillion.

Two things propelled these two American tech titans to such dizzying heights: AI and foresight.

Microsoft began investing in OpenAI, the creator of the popular AI chatbot ChatGPT, in 2019. Meanwhile, Nvidia CEO Jensen Huang pushed his company toward developing AI chips years before generative AI exploded onto the scene.

Both companies have bet on the long term to take advantage of the current boom in artificial intelligence. And so far, their gamble has paid off, leaving Apple behind. But how long will this last?

This year, London Tech Week, the UK’s annual tech event, might as well have been called London AI Week. The letters AI were written on every stand and uttered in every speech.

I met Anne Boden, the founder of Starling Bank, a major fintech disruptor. She was very enthusiastic.

“We thought we knew who the winners and losers were (in technology),” she told me. “But with AI, we’re rolling the dice again.”

She believes she is witnessing the AI ​​revolution that is reshaping the technology sector and she wants to get back into it.

That same week, I also attended the Founders Forum, an annual gathering of about 250 high-profile entrepreneurs and investors. In other words, it was a lot of money. It’s a confidential event, but I don’t think I’ll get into too much trouble saying that a lot of the discussions there were also centered around AI.

Life comes to you very quickly.

“Given the rising valuations of technology companies, future missteps could cause wild swings in share prices,” warns Susannah Streeter, head of capital markets at investment firm Hargreaves Lansdown.

“Like the Internet bubble, overenthusiasm can turn into disappointment.”

In 2023, you would think that anything with the acronym “AI” in it was guaranteed to open up a lucrative path to funding, with massive investment in all things AI.

My friend Saurabh Dayal, based in Scotland, is identifying AI projects that his investment firm could potentially collaborate on.

He said he quickly grew tired of the misleading speeches.

“I spend a lot of time saying, ‘…but that’s not AI,’” he tells me.

It seems that investors and customers are finally more aware of the term AI and, therefore, more demanding.

Additionally, there is a growing awareness that current generative AI products don’t quite live up to their own hype. They contain inaccuracies, misinformation, bias, copyright violations, and just plain weird content.

Early physical AI devices, like the Rabbit R1 and the Humane Pin, received poor reviews.

“We see the generative AI market maturing a bit at the moment – ​​early experiments had high expectations, but when things got going there were too many unexpected outcomes,” says Chris Weston, chief digital and information officer at technology services firm Jumar.

“Companies have a lot of value tied to the goodwill, trust and comfort their customers have in their services. The introduction of ungovernable chatbots is for many a step too far.”

Technology analyst Paolo Pescatore believes AI companies are under pressure to deliver on their promises. “The bubble will burst as soon as one of the giants fails to show significant growth through AI,” he warns.

But he doesn’t think that will happen anytime soon.

“Everyone is still jostling for position, and all companies are basing their strategy on AI,” he adds.

“All players are stepping up their activities, increasing their spending and achieving early successes.”

There is another reason why the AI ​​bubble could burst. It has nothing to do with the quality of the products or their market value. It has to do with whether the planet itself can afford it.

A study published last year predicted that the AI ​​industry could consume the same amount of energy as a country the size of the Netherlands by 2027 if growth continues at its current rate.

I interviewed Professor Kate Crawford of the University of Southern California for the BBC’s Tech Life podcast, and she told me that worrying about the amount of electricity, energy and water needed to power AI keeps her up at night.

Dr. Sasha Luccioni of machine learning company Hugging Face is also concerned.

“There simply isn’t enough renewable energy to power AI right now – most of that bubble is fueled by oil and gas,” she says.

The hope is that this technology could be used to identify sustainable solutions, such as the secret of nuclear fusion or how the sun gets its energy. But that hasn’t happened yet, and in the meantime, “AI systems are putting a strain on energy grids that are already under enormous pressure,” adds Dr. Luccioni.

With so much uncertainty, it’s unlikely that the world’s richest companies will be shaken up again. But for now, Apple is struggling to catch up with Microsoft and Nvidia in the artificial intelligence race.