The AI Trade Deconstructed: AI Builders, AI Suppliers and AI Product firms!
When I posted my valuation of Anthropic a few days ago, I noted that turbulence lay ahead, both for the company and the market. I did not expect that turbulence to be this forceful and arrive this soon, but markets don't have an obligation to wait until it is convenient for investors, to adjust to new realities. With the election results on November 3 acting as a catalyst, investors initially…
The AI industry is comprised of four distinct groups: AI suppliers, AI builders, AI products companies, and AI customers. Each group has its own unique interests and payoffs as the AI market grows and evolves.
AI suppliers are those that provide the infrastructure and resources necessary to power AI agents and models. This includes high-powered chips, electrical equipment, power, and real estate companies all benefitting from the surge in demand. Nvidia has claimed a significant share of this market, but other chip companies also stand to gain.
AI builders are the hyperscalers such as Alphabet, Amazon, Meta, and Microsoft, who have invested billions into AI infrastructure. While these companies have been rewarded for their capital spending, some question whether the AI trade is nearing its end as investors wait for payoffs.
AI products companies are those that are directly creating AI products and services, with a handful of private companies hoping for public listings and others employing AI to create new offerings. However, there is currently little substance to show in terms of revenue generated by AI products and services.
AI customers are the ultimate group that will determine the long-term value creation potential of the AI industry. While the hype is based on AI's vast reach and monetization potential, current ARR numbers for AI products and services amount to only about $250 billion, a small fraction of the total investments made. The success of the AI ecosystem hinges on this group growing significantly in terms of both reach and spending.
Written by urgent.news from Musings on Markets's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
