Anthropic’s Claude AI has been making headlines recently for its disruptive impact on the software industry, but one researcher says there’s probably an even bigger bad actor lurking in the tech world.
Tom Essay, founder and president of Seven’s Report, says Google’s Gemini threatens to disrupt the way investors view big AI companies today.
In a note to clients on Tuesday, Essay highlighted three risks posed by Gemini, specifically the November update.
First, it has the potential to steal market share from OpenAI’s ChatGPT. That could jeopardize OpenAi’s ability to deliver on the $1 trillion in spending it has promised to companies like NVIDIA, he said.
Second, the fact that Google used its own chips to develop Gemini could undermine the importance of major semiconductor providers.
“The reason companies like Nvidia, Broadcom, and Taiwan Semi have grown explosively in recent years is because of the insatiable demand for the semiconductor chips needed to build LLMs,” the essay reads. “Google making its own chips implies that demand for NVDA, AVGO, and TSMC’s chips may be weaker than expected. This means slower earnings growth and lower multiples for semiconductor stocks.”
This leads to the third point. Because Gemini was so effective and cost less to produce than other big chatbots, Essay said investors are monitoring spending levels from hyperscalers more closely.
“If Google can make Gemini as good as ChatGPT with its own chips, chances are others can do the same. The fear is that AI will become a commodity and trillions of dollars of AI infrastructure investments will become foolhardy,” the essay wrote.
“Plainly, Gemini has shattered the idea that all money spent on AI is ‘good’ money that leads to profit growth,” he continued. “Rather, the paradigm in which AI/tech stocks exist has changed as scrutiny has begun on AI capex. In fact, this means that it is no longer a situation where the companies that invest the most in AI infrastructure ‘win,’ as we can see in the market’s reaction to the collapse of mega-cap free cash flow.”
