ChatGPT is about to celebrate its first birthday, and the competition is heating up.
In August, Nvidia (NASDAQ: NVDA) said its graphic processing units (GPUs) are flying off the shelves.
But what makes the GPU, a device invented in 1999, so popular today?
Well, Nvidia was the pioneer of the GPU, a device that can boost a computer’s performance by taking over the graphics processing tasks from the central processing unit (CPU).
Unlike the CPU, which has a few processors that work sequentially, the GPU has thousands of processors that work in parallel, making it a powerhouse for intensive workloads.
Here’s the thing: the original intent for GPUs was to process graphics for video games.
Where GPU caught on was when they were applied to deep learning, an advanced AI technique to feed machines with enormous amounts of data and help them learn by trial and error.
Slowly but surely, the stage was set for an explosion in demand.
Big tech joins the party
GPU’s popularity skyrocketed when ChatGPT burst into the scene.
In the latest quarter, Nvidia’s data centre revenue nearly tripled, boosted by accelerating demand to support generative AI and large language models.
And who is buying all these GPUs?
The list of customers reads like the who’s who of big tech: Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL), Microsoft (NASDAQ: MSFT), Meta (NASDAQ: META) and Oracle (NYSE: ORCL).
The behemoths are pouring billions into GPUs.
It’s not hard to understand why.
The use cases are starting to emerge, and the revenue dollars are starting to flow in.
For instance, Meta has just reported that its AI-powered Advantage+ Shopping Campaigns has exceeded US$10 billion in revenue run-rate.
Advantage+, which is powered by Generative AI (GenAI), enables advertisers to create up to 50 ads at a time with fewer inputs, thereby facilitating rapid ad optimisation to achieve a higher return on ad dollars spent.
That’s not all.
AI recommendations have also helped boost time spent on Facebook and Instagram by 6% or more.
Meanwhile, Microsoft Cloud revenue swelled by 24% year on year in its latest quarter to almost US$32 billion, accounting for over 56% of the Redmond tech giant’s overall sales.
In particular, AI services helped to add three percentage points of growth to its Azure cloud segment, up from a single percentage point a quarter ago.
Azure growth accelerated from 26% year on year a quarter ago to 29% in its latest quarter.
In short, we’re talking about 10s of billions of dollars at stake — and it’s only been a little under a year since ChatGPT spurred growth.
Where do we go from here?
In the short term, billions will be spent to support the proliferation of AI services around the world.
We said so as much in our free report HERE.
The bigger question is: how do businesses benefit from this AI boom?
Back in April 2023, I shared with members of our The Smart All Stars Portfolio six predictions on where generative AI is headed and how the trend will evolve over time.
So, let me lean outside the window and make a prediction …
The most pertinent use cases involve tasks which require repeat experimentation such as A/B testing.
We see this use case playing out at Meta where its Advantage+ solution is enabling advertisers to generate multiple ads and rigorously A/B testing to find out which ad format delivers the best results.
And that’s just in marketing.
There is enormous potential for other use cases and applications ranging from drug discovery, product listings, chatbots, letter drafts, and much more.
Get Smart: A front row seat to the future
There is a side benefit to investing in innovative companies.
For instance, I invested in Netflix (NASDAQ: NFLX) back in 2007, long before online streaming was a thing. Because of that, I saw the disruption coming for our local cable TV services long before Netflix arrived at our shores.
It wasn’t because I was smarter than everyone else.
I simply had a front row seat to the innovation happening at the leading video streaming company taking the world by storm.
If you’re wondering about how you can leverage AI in your investment portfolio, and how it can boost your portfolio, good news! We just released an urgent Special Free Report to cover everything you need to know about AI and its implications for investors. Find out which listed companies are actively using AI to power their businesses and what you should do to prepare for the AI boom. Click here to download your free report now.
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Disclosure: Chin Hui Leong owns shares of Alphabet, Amazon, Meta, Microsoft, and Netflix.
