Where's the golden opportunity in AI?

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💰 Where’s AI’s Golden Opportunity? 💰

Whether you are an investor willing to bet on AI, a founder building a start-up, or someone willing to transition into the industry to futureproof your job security, the feeling of uncertainty is unavoidable.

But it shouldn’t have to be that way.

Today, we are delving into the AI industry through the entire creation pipeline, across all relevant companies and markets, to answer the great question:

Where in AI should you be focusing on?

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Going back to the previous question, we must break the AI industry down into its main layers, shown below, and evaluate opportunities and risks across the board. That is:

Which companies in each segment are making money, and what events could change the current picture?

Source

To start, let’s take a look at the missing layer in the previous picture: hardware.

The Double C

With an extremely dominant player in Nvidia with a +90% share of the GPU market (the de facto hardware for frontier AI today) companies in this segment just need to exist to see their stocks or private valuations go up (with one notable exception, Intel).

Besides this lagging example (still beat analyst estimates in Q1 2024) companies in this sector have super healthy margins and are extremely heavily capitalized (and subsidized, due to its geopolitical importance).

In fact, if Nvidia isn’t winning more money it’s simply because they are constrained by their own supplying capability.

Long story short, it’s basically the best market to be in right now, as demand is booming. This gives incumbents like Nvidia enormous pricing power, to the point that its net profit margin is, brace yourself, 48% as of January 2024.

Nonetheless, since the beginning of the year, Nvidia is up 88%, almost doubling its already trillion-dollar valuation.

Among the risks, increasing global tensions between China and the US with the looming threat over Taiwan by the former, a place where TSMC, Nvidia’s…

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