Earlier this month it was reported that Open AI chief executive Sam Altman was trying to raise $7tn to overhaul the global semiconductor industry. At first glance, this seems like a ridiculous figure, but, when you dig into the numbers, it is clear the world is going to need a lot more semiconductors if artificial intelligence (AI) is going to become a ubiquitous technology.
IC TIP:
Buy
Tip style
Growth
Risk rating
Medium
Timescale
Long Term
Bull points
- Cheap relative to peers
- AI tailwinds
- Large operating margins
- Monopoly on high-end semiconductor manufacturing
Bear points
- Cyclical industry
- Revenue dropped last year
- Exposure to slow-growth smartphone market
- Risk of war in Taiwan
In his blog, Astral Codex Ten, Dr Scott Alexander lays out the scale of computing needed to create advanced AI. Each model that has been developed by Open AI has cost 25 to 100 times more than the previous one. The current version, GPT-4, cost $100mn to develop, while GPT-5, which is currently under development, will reportedly cost $2.5bn.