Who Wins Next from Generative AI?

In the early stages of a technology change cycle, the firms that benefit the most are those that provide the enabling platform. These are the firms that develop the basic technologies that other firms will use to build new products and services. 

In the generative AI business, that means Nvidia selling graphics process units. That fits an older pattern of new technology opportunities, where infra has to be built first, before use cases, apps and industries can develop. 

For example, in the early days of the internet, the firms that made the most money were the ones that built the infrastructure, such as the internet service providers and the web hosting companies. These firms provided the platform upon which other firms could build their businesses.

As the technology matures, the firms that benefit the most are those that develop applications of the technology. These are the firms that use the technology to create new products and services that meet the needs of consumers. 

For example, in the early days of the internet, once the “plumbing” was in place, the firms that made the most money were the ones that developed e-commerce websites and online advertising platforms.

Only after some time was it possible for substantial new industries and revenue streams to develop. A good road system was required before a mass market auto industry could develop, for example. 

Enabling Infrastructure	Subsequent App and Use Case Development
Roads	Suburbs, car culture, trucking industry
Airports	Passenger airlines, cargo flights, air travel
Power grids	Computers, appliances, electronic devices
Internet	Email, social media, online shopping, cloud computing
Cloud computing	Large-scale applications, such as Netflix and Amazon
Broadband internet	Netflix
Smartphones	Social media
High-speed computing	Generative AI, machine learning, artificial intelligence
Large amounts of data	Natural language processing, computer vision, medical diagnosis
Open standards	Interoperability between systems, collaboration between developers

In perhaps the same way, the early money to be made in generative AI will be reaped by Nvidia and GPU suppliers. Cloud computing will follow fairly closely, as more of the demand for cloud computing services shifts to support of training models and generating inferences. 

Over a period of time, generative AI will reshape consumer and business software, be incorporated into devices and then reshape business processes on a wider scale. 

The bottom line is that suppliers of GPUs have been the first to see significant revenue impact from generative AI. It is easy to predict that cloud computing “as a service” suppliers will see impact next, as well as data centers hosting such operations. 

It will take much longer for existing firms and processes to incorporate generative AI in ways that produce significant financial outcomes, as most of those applications will be indirect: gen AI will be used by existing processes. 

In most cases, applied gen AI will augment or improve existing processes, but without clearly-measurable financial impact. In the medium term, we should start to see some measurable changes as functions are revamped, replacing some legacy methods with gen AI replacements. 

Only eventually will whole new industries arise, supplying novel products.