The Arrival of the Next Era of Technological Advancement

The following chart illustrates a dramatic rise in Nvidia’s quarterly revenues, skyrocketing to approximately $25 billion—more than a five-fold increase since the beginning of 2024.

Other technology giants like Google and Microsoft are watching these figures in astonishment. Analysts who believe Nvidia has reached its zenith might need to reassess their predictions.

“Mainstream commentators are often blinded by the notion of ‘it’s merely about predicting the next word’. They perceive only hype and a continuation of business as usual; at most, they consider the prospect of another internet-scale technological shift,” remarks Leopold Aschenbrenner in a series of essays titled The Decade Ahead.

Before long, they will awaken. What is about to unfold is both thrilling and potentially alarming.

Artificial ‘superintelligence’

AI is advancing towards AGI (Artificial General Intelligence) at a much quicker pace than initially anticipated, enabling machines to exceed human cognitive capabilities. Beyond this lies ASI, or artificial superintelligence.

Nvidia isn’t the sole entity in the AI chip market. Google has introduced its Tensor Processing Units to enhance machine learning operations.

Nvidia holds over 70% of the AI chip market, with competitors Intel and Advanced Micro Devices keen to chip away at this colossal market share.

There’s no denying that Nvidia has a significant lead—what some refer to as a moat—but its enticing gross margin of 78% is likely to attract fierce competition, and it seems that it’s on the horizon.

The AI chip sector is projected to reach $400 billion in annual revenue before the decade concludes, welcoming numerous new entrants with customized chips tailored to specific functions.

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AI is declining in cost at a faster rate than any previous disruptive technology.

“The cost to operate artificial intelligence models of equivalent performance has been halving every four months—a trend we anticipate will continue throughout this decade. In contrast, Moore’s Law in the semiconductor sector has historically halved costs every 18-24 months, indicating that the AI revolution is progressing 4-6 times faster,” states ARK Invest.

Microsoft and OpenAI are rumored to be collaborating on a $100 billion data center centered around an AI supercomputer named Stargate, expected to launch in 2028.

Significant investments are flowing into similar initiatives across the US, China, Dubai, and other locations. Microsoft and Google are on track to spend over $50 billion each in capital expenditures in 2024, with Meta closely trailing behind. While not all of this expenditure is directed at AI, the trend is unmistakably clear.

Companies are more likely to make substantial AI investments if they believe the economic returns will justify it, according to Leopold Aschenbrenner.

OpenAI has reported a doubling of its revenue to $2 billion over the six months ending February 2024. If this doubling trend continues every six months, it could reach $10 billion by early 2025.

Microsoft is already estimated to be generating an additional $5 billion in revenue from AI.

This indicates that the substantial investment in AI is likely to yield quick returns. As companies like Microsoft, Google, and Meta begin to derive a significant portion of their revenues from AI—anticipated to occur within just a few years—the demand for capital will inevitably increase.

If Microsoft can persuade a considerable fraction of its 350 million paid subscribers to pay an additional $100 a month for an AI add-on, revenue growth could climb steeply.

“The ensuing repercussions are monumental. This would position AI products as the primary revenue engine for the largest corporations in America and represent their most significant growth area. Projections for overall revenue growth for these firms would soar,” adds Aschenbrenner.

“Stock markets would react accordingly; it’s possible we could witness the emergence of our first $10 trillion company shortly thereafter. At this juncture, big tech would likely be inclined to go all-in, each investing several hundreds of billions [at minimum] into further AI expansion. We could potentially see our first corporate bond sale exceeding a hundred billion dollars then.”

The power constraint

The primary limitation in the AI race is power supply. Power generation in the US has only increased by 5% over the last decade; however, the proposed establishment of a 100-gigawatt AI cluster would consume roughly 20% of the total US electricity supply on its own.

To support the growing demands of AI, tech companies may find themselves entering the power generation sector or purchasing aluminum smelters for their substantial power contracts.

While clean energy would be preferred, a Trump administration is more likely to advocate for US dominance in the AI arena to prevent China or a Middle Eastern nation from taking the lead. This could involve tapping into ample natural gas reserves and curbing green energy initiatives.

The risks associated with falling behind in AI, at the state level, are staggering.

Superintelligence has the potential to be weaponized. Rogue nations could utilize it to issue threats of annihilation or sabotage rival states, possibly neutralizing any nuclear deterrents. Nations that gain even a slight head start in AGI will possess a substantial competitive edge.

Aschenbrenner insists that the US must secure this race or risk forfeiting AGI supremacy to authoritarian regimes.

“These clusters can be established in the US, and we must coordinate our efforts to ensure this occurs domestically. American national security must take precedence over the temptation of unregulated capital influx from the Middle East, convoluted regulations, or even commendable climate commitments.”

South Africa is lagging in this competition. The immense power demands of this emerging sector cannot be met in a nation that has struggled to maintain consistent electricity supply for most of the past decade, with the recent year being an exception.

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