Madness and mayhem

In recent times, the tech world has experienced a whirlwind of chaos. The Democrats' monumental victory has shaken the foundations of many existing beliefs. However, a new level of turmoil was introduced when news broke of Jensen Huang's connection with a Chinese spy.

I communicated my recent thoughts to our AI Investment Brief subscribers, hoping our readers in the AI sector would find my insights valuable. The past fortnight has been nothing short of chaotic, marked by an initial dip in AI companies, followed by a market shock due to the Democrats' anticipated mid-term victory, which sent the Nasdaq 100 into its worst performance since March 2020.

I am currently processing all these events and aim to share my perspective, which I trust will prove beneficial. This scenario is not a collapse but rather a shift towards quality investments. The spending spree continues unabated, and the rise of the Democrats is expected to make data centers more expensive, thereby benefiting the hyperscalers.

Nvidia's wings are set to be clipped, along with the open-weight camp. However, an Anthropic IPO at a reasonable price could stabilize the sector. The neoclouds are currently the most vulnerable.

Despite a slowdown in Anthropic's growth rate, which has decreased from 147% a quarter to 45%, many industry experts interpret this as a sign of stabilization. The 45% quarterly growth is now considered the average pace of the entire AI economy.

AI revenue has surged to $188bn over the past year, and now stands at $345bn annually, which is four and a half times its level a year ago, translating to approximately 43% growth quarterly.

Anthropic's growth has aligned with the broader market, and year-on-year, it has grown about 1,000%. The initial 147% growth rate appears to be a misinterpretation, overshadowed by the consistent 45% growth.

In my discussions with non-tech companies and the consultancies that support them, I've gathered that these large firms are beginning to understand how to leverage AI effectively, and they anticipate increasing their spending next year compared to this year.