Einstein is credited with describing compound interest as the “most powerful force in the universe” and “the eighth wonder of the world”. That’s punchy stuff from a guy who changed physics forever by mathematically proving and visualising the power of atomic energy. Compound interest is indeed an investment and wealth mathematics phenomenon but what about the exponential possibilities of multiple technologies converging together at the same time? Diamandis and Kotler wrote about a faster future because of this fusion of technologies but we might need to adjust our time horizons. Like now. Einstein’s theories paved the way for nuclear energy and Microsoft has been the dominant force in bringing computing power to humanity, but now Microsoft is going nuclear… no, really.
This week Microsoft signed a stunning agreement to purchase electricity from Helion Energy’s nuclear fusion generator as soon as 2028. Yes, you read that correctly – fusion not fission. Helion believes it can mimic the stars in fusing hydrogen nuclei to create heat and light, at a commercially viable price and without harmful radioactive waste. Nuclear physicists have dreamt of this for decades but now it could be a reality in just a few years. For Microsoft, this is a bet. However, it gives us a clue as to the company’s thinking on the potential explosion of Artificial Intelligence (AI) adoption, and the energy-intensive demands of AI chips, known as GPUs. However, some GPUs started their commercial lives in a different world. I’d almost say the metaverse but let’s just say the foundations are still being dug, or mined.
The mining of crypto currencies is notoriously energy-intensive – huge computer processing power used to solve mathematical puzzles and verify the network/blockchain. The favoured comparison metric for intensity was the consumption levels of a small country like Iceland but things have moved on. Even though crypto may not be the “hot” asset these days, Bitcoin alone accounts for the equivalent of 80% of the Netherlands’ annual energy consumption. Of course, the hot tech today is AI and the crypto bros have spotted an opportunity. Massive investment in crypto-mining infrastructure was in danger of sitting idle but these huge ‘GPU farms’ have been repurposed to process AI workloads rather than verify and secure blockchain networks. So, expect other players to follow cryptominers, Hut 8 and Hive Blockchain, into AI ‘pivot’ mode. In the grand scheme of things these are small players, and I’m wondering are we missing more subtle compounding of tech capabilities by the incumbent giants?
The current AI headlines might suggest an existential threat to the tech world order but I’m considering another possibility. It’s a big call, with a smartphone prompt. The phones of today are perhaps the greatest current example of tech compounding as wireless infrastructure combined with powerful IoS/Android software and cloud services/app support to deliver the ultimate mobile super-tool. So, should we be paying more attention to Apple and Google moves in recent weeks? Let’s start with Apple.
Apple has about 1.2 billion iPhone users and has recently teamed up with Goldman Sachs to offer a savings account with a 4.15% interest rate. Within 4 days, a billion dollars of deposits had moved to Apple and it’s not just savings accounts they are thinking about in Cupertino. They have already launched Apple Pay, Apple Cash, Apple Buy-Now-Pay-Later(BNPL), Apple Card and Tap to Pay. And it’s not even a bank! However, it is arguably a fintech with a services division already doing almost $80 billion of revenues annually. For context, Goldmans does less than $50 billion. Given the uncertainties of how the AI future will pan out there is real power in Apple’s combination of hardware and software ecosystems platforming additional services. Fintech banking today, personal AI assistant tomorrow? However, if 1.2 billion users looks like a powerful starting position for tech compounding strategies how about Google’s 3.6 billion users of its Android mobile operating system?
Yes, the Bard AI chatbot launch hasn’t exactly been a dream start for Google in the AI race. Nevertheless, Google’s annual I/O Keynote presentation last week highlighted how much AI is already in the Google suite of products and how additional AI upgrades to email, search, maps and docs will play very well with billions of its users. No wonder the value of Google’s stock jumped by $50 billion on the day. Valuation volatility tells you levels of strategic uncertainty are high. And, there has been a lot of press coverage of an alleged leaked memo from a Google executive warning of the threat of open-source(free to access ) AI to Google’s competitive ‘moat’. For sure, AI innovation will accelerate with open-source chatbot code available to all but it feels like the enormous user platforms at Apple and Google contain huge ‘option value’ for compounding tech innovation, even AI collaborations. We often write opinion is cheap, money talks. So, we should be seeing the compounding of tech and the option value attached to that future attract some interesting capital and valuations. Well, here’s a flavour of recent days’ headlines:
Hugging Face reaches valuation of $2 billion to build the GitHub of machine learning – TechCrunch
Generative AI Start-Up Cohere Valued at About $2 billion in Funding Round – The New York Times
Character.AI, with no revenue, raises $150 mln led by Andreessen Horowitz – Reuters
AI StartUp Rewind Gets 170 Offers- and $350m valuation in Unusual Fundraising – Dealmaker
AI chip startup Cerebras Systems raises $250 million in funding – Reuters
Generative AI Startup Runway Raised $100 million at $1.5 Billion Valuation – Business Insider
It does make you think. But…soon you might not even need to write or speak those thoughts. Scientists at University of Texas, Austin, have combined MRI technology and AI to ‘translate’ people’s brain activity into actual speech. It would appear the predictive element in AI is able to monitor blood-flow patterns picked up in the MRI scan and read thoughts with surprising accuracy. And, there we were thinking GDPR compliance would be the privacy check on tech. You could feel a bit uneasy about the pace of change, even disruption, ahead but an individual struggling for speech today through disability will have a very different perspective. In fact, let’s step out of our entitled developed world economy and think for a moment about the greatest wealth generator of them all. Education.
Sal Khan founder of the Khan Academy, thinks AI could spark the greatest positive transformation education has ever seen. His upbeat vision is truly exciting – “AI can be the super tutor students need AND the assistant every teacher wants”.
Now, that would be the ultimate wealth compounder……for our world.