My AI (artificial intelligence) thesis is that this computing revolution will boil the oceans as the demand for the end product, intelligence, has no limit. I’ve written about this twice recently on Forbes, here and here.
From top down, what country will let itself be outsmarted by another? The answer is none. So when you look at all the countries at various stages of cold war it quickly becomes apparent that in that area alone the demand for AI and the ability to outsmart or at least be as smart as the other side of the conflict or even just competition will be overwhelming. Just consider the ongoing U.S. versus China dynamic and you will quickly realize the colossal demand for AI that friction alone will create.
The trouble is AI equals energy consumption.
You can wriggle on this hook as much as you like, but IQ will always back out to kilowatts, and infinite demand for smarts is in the medium and long term only bounded by the energy available to run the hardware.
Let’s look at Super Micro (SMIC), which does business as Supermicro. This stock has gone off the handle, here is the chart:
This is the first example of a giant AI secondary rally caused by AI because:
AI = Energy Consumption and Energy Consumption = Heat
If you have ever run some crypto mining rigs you will have an understanding of how much heat GPU-like hardware throws off, because computing is electrically speaking a short circuit just like an electric fire and it makes equivalent heat. Whether it’s a GPU or an ASIC or a card of tensor cores like a GPU or even a CPU, these circuits efficiently turn electricity into pure heat.
When Facebook buys 350,000 Nvidia V100s that’s about 100 megawatts of power, about twice the power the Cook Islands use, and that is all going to heat and the only way to stop that heat from cooking the equipment is to cool it down. So if you are in the business of cooling a server farm down you are sitting pretty. Anyone planning to run AI needs the sort of systems Supermicro produce to cool their country’s worth of electric space heaters down, and the crypto miners’ innovative attempts to keep their equipment from melting by siting themselves in Iceland etc underlines the inescapable need to dissipate power stations’ worth of waste heat.
The AI imperative obviously drives Nvidia and AMD’s prospects (disclosure: I hold AMD) but the boost in value and therefore stock prices is going to be driven right down the value chain to its base, energy, and across its feeder branches. The only bottleneck to this value generating process will be how fast chip companies can turn out the hardware and how fast the software people can crack various AI tasks that will transcend human capacities and need rolling out.
Ancilary opportunities like Supermicro are out there and new ones will appear; this is where the initial big scores are to be made.
As such, if you embrace the logic that demand for AI is unbounded then the hunt must begin for those businesses that will exist alongside AI and because of it suddenly enjoy infinite demand.
Once again it will be the infrastructure “picks and shovel” providers that are assured a big win, in this new stock market era, a reboot of the oldest stock market cycle of all. Boom, bubble, bust and grind.