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Artificial intelligence starts with semiconductors.
We have had two great presentations from two different companies investing in AI.
Click here to watch the recording from Sands Capital.
Click here to watch the movie from Baron Funds.
With semiconductors, earnings per share have risen 10x and the share price has also increased 10x over 10 years. Over this same time period, chips have shrunk in size from 45 nanometers 10 years ago to 3 nanometers today. Semiconductor chip prices have increased 5x and the number of chips produced is up 2x, over the past 10 years. The insatiable demand for semiconductors defies traditional price economics. Usually, the more you produce the lower the price. But the demand is so high that the prices and production go up and up and up. A lot of that demand is due to artificial intelligence. Dan talks about the “use case, and a great example is Apple.
Apple is a good example of how everything is interlinked. As semiconductors became more powerful, the iPhone could do more and more things. We’ll have more and more apps we can download and use. This increased the demand for the iPhone, which increased the demand for the semiconductors, which increased the capabilities of the chips, which fed back into more—a virtuous cycle!
Artificial intelligence is the same, only even more extreme. The more computing power you “throw” at the AI programs, the better they become. So, the virtuous cycle is beginning here as well. Dan calls it a use-case-explosion. We could go from a few hundred instances today to a few hundred million. It is all about compute improvements; a phrase that means as the hardware gets better, the IQ gets better and the use case explosion gets exponentially bigger.
How is a CPU different from a GPU?
The biggest difference between the chips that most of our computers use and the chips that NVIDIA creates is, surprisingly, easy to understand. A computer uses a CPU and an artificial intelligence chip uses a GPU. Dan showed a picture of a car being built by hand by a craftsman. And he showed a picture of the same car manufactured by Henry Ford on a manufacturing line. The CPU produces one thing at a time and the GPU produces things in parallel.
Read more about artificial intelligence and what it means for your investments and your future
