Elon Musk, the CEO of Tesla (NASDAQ: TSLA), has laid down the gauntlet.
Any company, in his opinion, that is not spending at least US$10 billion on artificial intelligence (AI) will not be able to compete.
In a single tweet, he’s issuing an ultimatum to would-be competitors.
For an AI market worth over a trillion dollars, it’s currently a game reserved for the big dogs of the tech world.
Going UP: US$10 billion is just the start
In case you think Musk is engaging in hyperbole, consider these points.
The cloud computing trio of Alphabet (NASDAQ: GOOGL), Amazon (NASDAQ: AMZN), and Microsoft (NASDAQ: MSFT) are expecting capital expenditure (capex) to increase “materially” and “meaningfully” in the coming year.
You can use whatever word you want.
But the direction of capex spending to support AI initiatives is going in only one direction: UP.
And that’s after Amazon and Alphabet spent US$52.7 billion and US$32.3 billion, respectively, in capex last year. Microsoft, on the other hand, has blown through US$39.5 billion in capex over the past 12 months.
Here’s the thing: the trio are not the only ones sinking 11-digit figures into instructure to support AI growth.
In Meta Platform’s (NASDAQ: META) most recent year, the social media company upped its capital expenditure for 2024 to between US$35 billion and US$40 billion.
As you can see, Musk wasn’t just making up the US$10 billion figure.
It’s the real deal.
A huge market: from real to surreal
The value of the generative AI (GenAI) market varies from billions to trillions, depending who you ask.
Bloomberg’s think tank estimates that the value could increase from US$40 billion in 2022 to US$1.3 trillion by the end of 2032.
On the other hand, McKinsey and Company believes that GenAI could add as much as US$4.4 trillion in economic benefits annually.
Who will be right?
We don’t know, no one does.
But judging from the dollars being invested, the GenAI market is expected to be HUGE.
At the moment, a huge chunk of these billions spent in capex is flowing to Nvidia (NASDAQ: NVDA), an early front runner in the building of infrastructure to support the future.
Will Nvidia be a winner?
And who is going to be the biggest winner?
We don’t know either — anyone who tells you that they are certain who the winners will be is either lying to you or to themselves.
But if that’s the case, where does all this leave investors?
These are some of the questions we explored in our webinar on “How the Magnificent 7 Stocks are Shaping the Future of Tech”.
Don’t miss out! Catch the replay here.
Disclosure: Chin Hui Leong owns shares of Amazon, Alphabet, Meta Platforms, and Microsoft.
