AI has been described as a transformative technology, in much the same way that the internet, the telephone, the industrial revolution, air travel, railways have been transformational. There is little doubt that AI could appreciably change the way that we do things from planning a holiday to writing a report. But how will AI make money?
Sure, AI has shown itself to be quite clever. It has been able to hack into websites, and it has uncovered flaws in software codes. Great. It has beaten a grandmaster at chess, and it has even defeated top-ranked players at the ancient board game Go. But where’s the money in that? Maybe I am missing something here.
Some proponents of AI have said that it is a technology that allows machines to perform tasks that typically require human intelligence. So, AI can learn to reason, recognise speech, interpret images and it could even solve complex math problems. But, again, where’s the money?
Additionally, which AI platform, if any will dominate? Is Claude better than Gemini? Is ChatGPT better than Co-pilot? Who knows?
Some AI agents can even act like personal assistants. But how safe is it to let AI have access to our emails and personal data so that it can execute sensitive actions such as make purchases on our behalf? How many people will sign up and pay for services like that? Some might.
Point is, AI will need to be monetised somehow to justify the investments. But it could take time. And that is the problem for investors. Currently, hyperscalers have spent hundreds of billions of dollars on building the infrastructure that forms the bedrock for AI. But the returns on investment have been disappointing.
Could what we are witnessing be a case of someone building a better mousetrap and hoping that the world will beat a path to AI’s door? But building a better contraption is unlikely to be enough. The improved mousetrap needs to be marketed, which requires a basic understanding of human needs, wants and demands.
It is that last part of consumer behaviour that is crucial. It is the willingness for people to pay for their needs and wants that they don’t yet know they need and want. That could happen, given time. But for now, AI companies are still feeling their way around the new technology.
In the meantime, the picks and shovel makers could be better positioned to capitalise on the AI buildout. It might not be nearly as exciting as picking the next AI winner. But jam today tastes a lot better than dry toast tomorrow.
Admittedly, cracks have started to appear in some AI outfits, following the change of guard in the US. This is unlikely to derail the rollout of AI, though. It might slow it down. But too much has been invested in AI to stop it. The AI genie is out of the bottle. It will continue to eat its way through the business world one byte at a time until it is fully satiated.
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Disclosure:David Kuo does not own any of the shares mentioned.
