AI Will Reshape the World of Business - Here it Comes First: Chart of the Week

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There seems little doubt that the transformative power of artificial intelligence will significantly change the world – but it won’t do everything at once, and it appears to be coming first to the advertising business.

This week, Google (GOOG) announced a chip that could compete with Nvidia’s (NVDA) technology. And in chorus, Meta (META) also announced its own chip that will allow both companies to vertically integrate to achieve their goals. They know what they are.

As Bank of America’s Justin Post wrote in a research note on Move, the key benefits of Meta’s AI are getting people to use the product more often, with better video recommendations, to increase ad spend through better ads that are better measured increase.

In April 2024, this is the vanguard of AI.

There has been a lot of talk about where our physics PhD students go after they graduate. As Zachary Quinto’s character who went from rocket scientist to banking analyst Margin call explained to his boss’s boss: “The money is much more attractive here.”

Big Tech, with higher profits, wages and reputation, has long occupied the top economic position over other industries (such as banking). Look at the “Magnificent Seven” and it’s not hard to see how they can pay for both top talent and as much research and development as the talent can handle.

It has been pondered that if Allen Ginsberg had lived past 1997, he might have said something like, “I saw the best minds of my generation hired at Google to sell programmatic advertising.” Or something like that As early Facebook investor Peter Thiel put it in 2013, “We wanted flying cars, instead we got 140 characters.” If you can’t beat them, join them.

But beyond the “children of today” woes of our ancestors – who put people on the moon, laid telecommunications cables across oceans and made medical breakthroughs – there is the simple fact that cutting-edge technology often happens at companies trying to bring you more personalized advertising that suits your interests.

Whether Meta has the ambition to spread its cutting-edge AI technology across the industry remains to be seen. But as Mark Zuckerberg once described his company: “Senator, we run ads.”

For Google, the path from its core ad sales product (search and Gmail) to cloud computing will be interesting. The same goes for Microsoft, whose OpenAI ChatGPT alliance could be seen as a marketing tool for its computers.

All of this feeds into a theory that we have written about on these pages. Last year, Myles Udland wrote that when it comes to AI, we either think too small or too big. And it’s difficult because the technology takes hold in a specific industry before spreading throughout the economy.

As another Bank of America analyst, Alkesh Shah, wrote this week, “Investors often overestimate the extent of technical disruptions in the short term and underestimate them in the longer term.”