DeepSeek’s arrival has unleashed a torrent of speculation about the future of AI.
While answers are scarce, opinions are plentiful.
Yet, amid the flood of information, what you focus on will make all the difference.
Amazon founder Jeff Bezos gives us an important clue from the past.
In May 1997, the online retailer was less than three years old when it went public in the US stock market.
Shortly after its launch, the young company faced a double blow.
First, US bookstore chain Barnes and Noble filed a lawsuit. Then, Forrester Research delivered another blow, labelling the online retailer “Amazon.toast.”
With competitors hot on its heels, Bezos made one of his most important speeches to his employees (bolded for emphasis):
“Look, you should wake up worried, terrified every morning.
But don’t be worried about our competitors because they’re never going to send us any money anyway.
Let’s be worried about our customers and stay heads-down focused.”
Amid all the hype surrounding billions in AI spending, a simple question remains: How will customers benefit?
Let’s explore further.
Focus on your customers, not your competitors
Alphabet (NASDAQ: GOOGL), the search giant, has infused AI into every aspect of its ads ecosystem across targeting, bidding, creative, measurement and campaign types.
For example, here’s how customers benefit when bidding on keywords using Google’s Broad Match:
“For example, an ad keyword including “cheap” could match with searches for “inexpensive” and “shoestring.”.
[Customer] Ads may show on searches that are related to your keyword, which can include searches that don’t contain the direct meaning of your keywords.
This helps you attract more visitors to your website, spend less time building keyword lists, and focus your spending on keywords that work.”
In this case, Broad Match leverages a key tenet of generative AI (GenAI): its ability to recognize patterns in language and identify relevant keywords that match the customer’s selected keyword.
This use case takes advantage of GenAI’s strength, in our view.
Next, Meta Platform‘s (NASDAQ: META) recent launch of Andromeda, a personalized ad retrieval engine, marks a significant advancement in how the company matches users with ads.
Essentially, Andromeda sifts through millions of potential ads within Meta’s ecosystem to find the best fit for each user.
Previously, this process relied on a less sophisticated, rule-based system that offered limited personalisation.
Andromeda, however, leverages the power of Nvidia‘s (NASDAQ: NVDA) Grace-Hopper Superchip and Meta’s own MTIA hardware.
This combination has dramatically increased the system’s capacity—by a factor of 10,000—leading to significantly enhanced personalisation.
For customers, this translates to faster and more cost-effective ad matching.
Crucially, Meta has attached a revenue figure to its AI efforts.
During 2024’s fourth quarter, Advantage+ shopping campaign revenue surpassed a US$20 billion annual run-rate, an impressive achievement.
Not to be outdone, tech giant Microsoft (NASDAQ: MSFT) has also revealed that its AI business has exceeded an annual revenue run rate of US$13 billion.
It’s AI-related revenue comes from a variety of sources.
For instance, back in July 2024, Microsoft said that GitHub Copilot (an AI-powered developer tool) is used by over 77,000 organisations.
Furthermore, customers who purchased Copilot in its first month of availability have collectively increased their seat count by 10 times. It’s for good reason too, daily Copilot usage has more than doubled over the past quarter.
Meanwhile, demand for AI services has also helped lift Microsoft Azure revenue by 13 percentage points.
Without a doubt, the traction in AI use is impressive.
However, with US$325 billion in capital expenditure slated for 2025, investors will need to see more to be able to justify the sky-high investments on the table.
Get Smart: Patience will win the day
As the noise reaches a crescendo, it’s imperative to remember that ChatGPT is barely two years old.
In other words, the AI sector is still in its infancy.
No one knows for sure how the competition will shake out and who will emerge as the winner.
There could be multiple winners.
Similarly, today’s front-runners may be overtaken, and the ultimate winner may not even be among the current contenders.
The future remains uncertain.
Hence, as investors, we should focus less on speculation and more on observation.
You’re better off being patient and observing how the industry develops.
After all, if a stock is destined to be a big winner, its returns will unfold over many years, even decades, as Amazon has for its shareholders.
If so, you will have plenty of time to invest in the future.
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Disclosure: Chin Hui Leong owns shares of Alphabet, Meta and Microsoft.
