It’s been a little while since we had an overview of the future prospects for the AI market. I know that’s a topic that’s relevant to many on this board, as it is to me. NVDA is my largest position, at 12.8%.
I found this paper from an analyst at Ray Dalio’s hedge fund, Bridgewater, to be very helpful, from early Sept.
In the next couple years, the analyst predicts:
Among other things, a much broader investment boom. So far, investment in AI has mostly been narrow; massive dollar amounts have been spent but by relatively few players. Some market watchers see this as a risk because the revenues from building out that capacity are not diversified (largely going from one firm in this tight circle to another). I disagree with this interpretation. What I see is that the people who know the most are spending a lot and the pace of their spending is accelerating, while so many others are not investing at all. I think spending by the major tech names (and some small startups) will continue to accelerate.
One way this could play out is that, eventually, one of those startups with very few employees and many AI agents crushes traditional rivals—in a sector outside of traditional tech. That then sets off panic capex in nearly all sectors as a risk that used to be existential to the Googles of the world becomes existential across the economy. If I had to guess, I’d say we are about 18 months from that realization, but I don’t want to suggest any false precision here.
One of the key points made about the long-term trend is that AI, broadly described, continues to accelerate in matching or exceeding human benchmarks:
The analyst calls particular attention to the line to the farthest right, which measures the ability of AI to solve complex math problems. Note that this is quite a different problem domain than predicting what word will come next in this sentence.
It’s not a long paper, and I encourage everyone who has an interest in the AI market to read it.
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