Gen AI is resulting in $600Bn capex hole globally.
Here is a simple calculation by David Cahn of Sequoia Capital.
All you have to do is to take Nvidia’s run-rate revenue forecast and multiply it by 2x to reflect the total cost of AI data centers (GPUs are half of the total cost of ownership—the other half includes energy, buildings, backup generators, etc)1. Then you multiply by 2x again, to reflect a 50% gross margin for the end-user of the GPU, (e.g., the startup or business buying AI compute from Azure or AWS or GCP, who needs to make money as well) - source
OpenAI is the only winner ..so far
When it comes to consumer apps, OpenAI is the only winner so far. OpenAI’s revenue is rumored to be ~$3.4B, up from $1.6B in late 2023 - and while there are many startups doing <= $100mn ARR, nobody is even close to OpenAI.
The big question is outside of ChatGPT, how many apps have gone mainstream? Used by millions? (FYI: Perplexity did $20mn ARR last year).
That begs us an important qn:
So who is making money in Gen AI world?
The wonky ones.
You don’t want expect them to win..but they are.
The consultants.
Yeah, McKinsey, BCG, IBM, KPMG.
They have literally no real skin-in-the-AI game (when was the last time you saw a McK developer sharing their AI product/hack on twitter?), but they are.
Don’t believe me? Eat this 👇🏼
IBM has secured over $1 billion in sales commitments related to generative AI.
Accenture reported $300 million in sales last year from AI-related services.
McKinsey projects that 40% of its business this year will be tied to generative AI.
KPMG's U.S. division is targeting over $650 million in AI-related business opportunities, having previously made no money from this area. (via: NYT)
Clearly, at enterprise level - there is just too many questions around Gen AI (as per CIOs, getting full value from AI solutions is more labor-intensive than anticipated) and this gap is what consultants fill in.
So..what are you doing with your life?