Artificial intelligence chipmaker Nvidia recently reported higher-than-expected sales of $30 billion in the last quarter. However, the growth pace has slowed compared to previous quarters. Despite doubling sales and profit to $16.5 billion from a year earlier, Nvidia shares dipped 5% in after-hours trading, indicating investor concerns about the sustainability of this growth.

Massive investments are being funneled into AI, with Goldman Sachs predicting $158 billion in AI investments this year, half of which is expected in the US. They foresee over $1 trillion in AI capital expenditure in the coming years (link).

AI Developing at a Breakneck Pace

Tech giants like Google and Meta are heavily investing in AI infrastructure. Google CEO Sundar Pichai emphasized the risk of underinvesting in AI infrastructure. Meta’s AI spending reached over $24 billion last quarter, with expectations to increase significantly by 2025.

Waiting for ‘Killer’ Applications

Despite the hype, practical applications that lead to substantial productivity gains are still emerging. Gartner predicts that 30% of AI projects might be abandoned by 2025 due to various challenges. The need for ‘killer’ applications that justify the massive investments is evident.

Gartner’s ‘Hype-Cycle Model’

Gartner’s hype cycle describes the development stages of breakthrough technologies. Generative AI, like ChatGPT, has triggered significant hype but has not yet reached the productivity plateau. The AI race continues, but its success remains uncertain.

AI Here to Stay, Despite Bubble Fears

Concerns about an AI investment bubble are growing. However, experts believe AI will be a significant trend in the medium and long term. While transformative changes may not happen quickly, AI’s impact on productivity and GDP is expected to grow gradually over the next decade.

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