Iago Gallego Mato @iago_gallegom: "𝗧𝗵𝗲 𝗔𝗜 𝘀𝘂𝗯𝘀𝗶𝗱𝘆 𝗶𝘀 𝗱𝗶𝘀𝗮𝗽𝗽𝗲𝗮𝗿𝗶𝗻𝗴 In..."

Spain

𝗧𝗵𝗲 𝗔𝗜 𝘀𝘂𝗯𝘀𝗶𝗱𝘆 𝗶𝘀 𝗱𝗶𝘀𝗮𝗽𝗽𝗲𝗮𝗿𝗶𝗻𝗴 In recent weeks, several news stories have emerged suggesting that AI is no longer as profitable for client companies as it once was: Anthropic raising prices and limiting tokens on their paid tools, $MSFT (Microsoft) canceling their Claude Code subscriptions, $UBER (Uber Technologies Inc.) spending its entire year's worth of available tokens in just 4 months... 𝗪𝗵𝗮𝘁 𝗱𝗼 𝗜 𝗺𝗲𝗮𝗻 𝗯𝘆 𝘁𝗵𝗲 𝗔𝗜 𝘀𝘂𝗯𝘀𝗶𝗱𝘆? Since the appearance of ChatGPT in 2022, all AI tool companies, with OpenAI and Anthropic being the most significant, have been losing unprecedented amounts of money, surviving based on external funding from both large companies like $GOOG (Alphabet) or Microsoft, and private investors seeking a long-term return. And this is what's important: all these investors want and will demand a return. Anthropic taking measures to reduce costs and increase revenue is proof that the patience of these investors is gradually running out. 𝗔 𝘄𝗼𝗿𝗹𝗱 𝘄𝗵𝗲𝗿𝗲 𝗔𝗜 𝗶𝘀 𝗻𝗼 𝗹𝗼𝗻𝗴𝗲𝗿 𝗳𝗿𝗲𝗲 For years, the argument against software companies and in favor of AI companies has been: "why pay for $NOW (ServiceNow Inc) or $ADBE (Adobe Systems Inc) licenses for my employees when they can do the same thing for free with AI?". Anyone who understands artificial intelligence technology knew that this argument had no validity whatsoever; AI is not free, quite the opposite in fact, it is tremendously expensive. AI companies were only offering it for free to quickly acquire and hook customers, following the model of companies like $NFLX (Netflix, Inc.) or $UBER, but like them, sooner or later, these prices would skyrocket, and that moment is arriving. 𝗧𝗵𝗲 𝗰𝗵𝗮𝗿𝘁 Regarding this, a chart was released recently that illustrates this idea perfectly. This chart shows how, over time, as more and more expensive chips come out that require more and more power, more and more cooling, more and more space, and more and more capable networks; the cost per AI token is growing exponentially and at a much faster rate than software license costs, which have a relatively fixed cost in comparison. 𝗧𝗵𝗶𝘀 𝗶𝘀 𝗷𝘂𝘀𝘁 𝘁𝗵𝗲 𝗯𝗲𝗴𝗶𝗻𝗻𝗶𝗻𝗴 With memory costs growing exponentially due to production shortages compared to the enormous demand, energy costs rising due to the war in Iran, and increasingly more legislative problems with setting up as many data centers as planned, the entire AI world is becoming more expensive much faster than expected, and investors are demanding profits soon. In this situation, the winners are the software companies that continue to grow at as high rates as ever and that have added AI capabilities to their products without falling into these costs. Companies that, moreover, are at historically lower valuations than ever. Companies like ServiceNow, Adobe, Constellation Software, or Uber. 🍀 Best regards and good luck, investors. $SPX500 $NSDQ100

Not investment advice. The author may have financial interests in the mentioned instruments.