Meta founder and CEO Mark Zuckerberg speaks during the Meta Connect event at Meta headquarters in Menlo Park, California, on September 27, 2023.
Josh Edelson | AFP | Getty Images
Measure CEO Mark Zuckerberg is amassing a large stock of Nvidia chips, spending billions of dollars so his company can develop and train advanced forms of artificial intelligence.
But even he says the AI hype is likely to drive too much investment.
“I think there’s a good chance that a lot of companies are being overbuilt right now, and you look back and you’re like, oh, we probably all spent billions of dollars more than that we had to do,” Zuckerberg said. podcast this week with Bloomberg’s Emily Chang.
He is not the only one to express that sentiment.
It is open Of the alphabet On Wednesday’s earnings call, CEO Sundar Pichai said his company is likely to spend more on AI infrastructure, including Nvidia’s graphics processing units (GPUs). But he sees little choice.
“When we go through a process like this, the risk of not having a lot of money is greater than the risk of investing more than this for us,” Pichai said.
Apart from Meta and Alphabet, Nvidia has been gathering business since Microsoft, Amazon, Oracle and Tesla, all of whom have publicly announced that investment in AI is a priority this year and the foreseeable future. Nvidia’s revenue has more than tripled for three straight quarters and is expected to more than double in the current period.
Alphabet and Tesla have highlighted their spending on building AI in earnings this week, and investors can expect to hear more next week, when Microsoft, Amazon and Meta report.
Meta introduced its latest version of Llama AI on Tuesday. The model, called Llama 3.1, comes in three different versions, with one version being the largest and most capable AI model from the Meta to date. Meta adheres to open source, which means that the technology can be freely obtained by outside developers, even if the company pours money into the infrastructure.
Zuckerberg said in a podcast with Chang that companies are “making the right decision” about their AI investments despite the high costs.
“Because the problem with being behind is that you’re no longer in a position with the most important technology for the next 10 to 15 years,” Zuckerberg said.
The way Photsi sees it, even if Alphabet is making a lot of money, the infrastructure “works a lot for us.”
‘Threat and opportunity’
Shares of Nvidia are up 131% this year after rising 239% in 2023. The company is now valued at around $3 trillion, behind only Apple and Microsoft. although it briefly passed both of the market in June.
Nvidia gets more than 40% of its revenue from Microsoft, Amazon, Google, and Oracle, all of which require a high level of GPUs for their public cloud offerings. Although those are some of the most profitable companies in the world, there is concern among investors about raising large amounts of money.
David Cahn, a partner at the business firm Sequoia, wrote in a blog post last week that leveraged finance is competitive and follows the power of gamification, creating “a cycle of rising competition.” .”
“The cloud giants see AI as both a threat and an opportunity and don’t have the luxury of waiting and seeing how the technology evolves,” Cahn wrote. “They have to act now.”
Cahn calculated that in the technology industry, there needs to be $600 billion in annual AI revenue to justify all the money spent on data centers and chips.
On Wednesday, Cahn followed up by saying that Zuckerberg’s and Fox’s views on reducing the minimum wage strengthened his theory.
“The CEOs of Google and Meta both came out in the last 24 hours now agreeing with my AI Arms Race report: That AI CapEx is driven by game theory and FOMO versus real money/usage,” Cahn said. wrote on LinkedIn.
Jensen Huang, co-founder and CEO of Nvidia Corp., demonstrates the new Blackwell GPU chip during the Nvidia GPU Technology Conference on March 18, 2024.
David Paul Morris/Bloomberg via Getty Images
Nvidia says demand will remain strong for its new generation of AI chips, called Blackwell, which will begin shipping later this year. But it is beginning to answer investors’ questions about the return on investment as growth slows due to a tough historical comparison.
Colette Kress, Nvidia’s chief financial officer, told investors in May that the company calculated that if a cloud provider spends $1 on an Nvidia-based server, it can rent it for $5. Goldman Sachs analysts they said in a recent report that Nvidia wants to share these types of data points to instill confidence in investors.
Tesla CEO Elon Musk said on his company’s earnings call Tuesday that “demand for Nvidia hardware is so high that it’s often hard to find GPUs.” Tesla said that investment in AI in the quarter reached $ 600 million, as the company invests in autonomous driving and humanoid robots.
Musk said Tesla is focusing on developing its Dojo supercomputer because Nvidia chips are too expensive and hard to find.
““I think we have no choice because the demand for Nvidia is so high,” Musk said.
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