AI Industry May Never Earn Back Its $150 Billion Nvidia Chip Spend : r/AIToolsTech
The rush to purchase hardware for building and running generative AI chatbots has companies spending at an unprecedented rate.
According to an analysis by Sequoia Capital featured in Tom’s Hardware, cloud service providers and other firms may invest up to $300 billion in AI hardware in 2024. Nvidia is expected to receive about half of this investment, with the remainder going to providers of servers, cooling systems, energy, and other data center components.
Will these investments yield returns? The outcome largely hinges on two factors:
- The definition of “payoff.”
- The emergence of a “killer app” for generative AI.
If “payoff” means generating enough profit to cover the initial investment — which Sequoia estimates would require AWS and other tech giants to generate $600 billion in generative AI revenue — such returns could take decades to materialize.
To contextualize Cahn’s estimates, major tech companies like Alphabet, Amazon, Apple, Meta, and Microsoft are projected to spend around $400 billion on capital expenditures in 2024, mostly on AI-related hardware and R&D, according to The Economist.
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