AI Revenue in the "Picks and Shovels" Phase

Some idea of the ultimate creation of revenue within the artificial intelligence ecosystem, broadly defined to include many of the same participants in the internet ecosystem will shed light on ultimate outcomes. 

Right now, the clearest identifiable revenues are earned by providers of infrastructure, such as graphics processing units or providers of computing-, storage-, models- or inferences-as-a-service. 

In the U.S. internet ecosystem, for example, some $3.3 trillion is estimated to be earned annually by firms in the ecosystem. As always, many of the products in the ecosystem use the internet in some way to support the features and value of their products. 

Not all semiconductors, devices, advertising, platforms or e-commerce and content, for example, are directly and fully attributable to “the internet” in specific. 

In some cases, as with home broadband, it is infrastructure that continues to supply much of the revenue. But even there, revenue earned supporting the use of mobile devices produces the majority of revenue, and internet access is only part of the value proposition. 

Segment	Estimated Annual Revenue (USD Billion)	Source
Semiconductors	200	[1, 2]
Devices	500	[3, 4]
Apps	150	[5, 6]
Advertising	300	[7, 8]
Platforms	500	[9, 10]
Connectivity	250	[11, 12]
E-commerce	1.2 trillion	[13, 14]
Content	200	[15, 16]
Total	3.3 $Trillion

Sources:

[1] Semiconductor Industry Association: https://www.semiconductors.org/

[2] Gartner: https://www.gartner.com/en/newsroom/press-releases/2023-04-26-gartner-forecasts-worldwide-semiconductor-revenue-to-decline-11-percent-in-2023

[3] Consumer Electronics Association: https://www.cta.tech/

[4] IDC: https://www.idc.com/

[5] App Annie: https://go.appannie.com/AppAnnieLite_IWD_Form.html

[6] Sensor Tower: https://sensortower.com/

[7] Interactive Advertising Bureau: https://www.iab.com/

[8] eMarketer: https://www.insiderintelligence.com/topics/category/emarketer

[9] Meta Platforms Investor Relations: https://investor.fb.com/home/default.aspx

[10] Alphabet Investor Relations: http://abc.xyz/investor/earnings

[11] CTIA - The Wireless Association: https://www.ctia.org/

[12] Federal Communications Commission: https://www.fcc.gov/

[13] Digital Commerce 360: https://www.digitalcommerce360.com/

[14] Statista: https://www.statista.com/

[15] National Endowment for the Arts: https://www.arts.gov/

[16] Bureau of Labor Statistics: https://www.bls.gov/

For such reasons, the ultimate winners within the AI ecosystem will likely be more difficult to identify with precision. Specific AI hardware and software will continue to be a source of revenue for some providers within the value chain. 

But most of the AI-related revenue upside will come in more-indirect ways, as AI becomes a feature of many products and services but not a direct and identifiable revenue stream.