The $7 Trillion AGI Race Just Started
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Sam Altman’s legendary A.I. bet… The cost of 30 seconds and 200+ million eyeballs… The Fed pulls back the lifeline… A once-in-a-lifetime tech breakthrough…
By Michael Salvatore, Editor, TradeSmith Daily
Few things are measured in trillions. The idea of multiplying one million by one million is so large as to be basically inconceivable.
We’re talking “stars in the galaxy” and “trees on the planet.”
In the financial sense, there are no trillionaires — at least not yet. So to understand the scope of a trillion in this way, we have to zoom way out.
Microsoft, the world’s biggest company, is worth $3.1 trillion. All of U.S. corporate debt issuance last year was $1.4 trillion. The U.S. debt and the U.S. GDP, respectively, are about $34 trillion and $23 trillion.
That’s the scale we’re talking about. The biggest assets and liabilities in the world.
Yet… OpenAI CEO Sam Altman made headlines in The Wall Street Journal on Friday for seeking to raise somewhere between $5 and $7 trillion to “reshape the global semiconductor industry.”
From the story…
The fundraising plans, which face significant obstacles, are aimed at solving constraints to OpenAI’s growth, including the scarcity of the pricey A.I. chips required to train large language models behind A.I. systems such as ChatGPT. Altman has often complained that there aren’t enough of these kinds of chips—known as graphics processing units, or GPUs—to power OpenAI’s quest for artificial general intelligence, which it defines as systems that are broadly smarter than humans.
Such a sum of investment would dwarf the current size of the global semiconductor industry. Global sales of chips were $527 billion last year and are expected to rise to $1 trillion annually by 2030. Global sales of semiconductor manufacturing equipment—the costly machinery needed to run chip factories—last year were $100 billion, according to an estimate by the industry group SEMI.
The amounts Altman has discussed would also be outlandishly large by the standards of corporate fundraising—larger than the national debt of some major global economies and bigger than giant sovereign-wealth funds.
Such a sum of investment would dwarf the current size of the global semiconductor industry. Global sales of chips were $527 billion last year and are expected to rise to $1 trillion annually by 2030. Global sales of semiconductor manufacturing equipment—the costly machinery needed to run chip factories—last year were $100 billion, according to an estimate by the industry group SEMI.
The amounts Altman has discussed would also be outlandishly large by the standards of corporate fundraising—larger than the national debt of some major global economies and bigger than giant sovereign-wealth funds.
“Outlandish” puts it mildly. To date, the largest round of corporate financing was $14 billion – Ant Financial’s Series C round in 2018. That’s 0.2% of the top end of what Sam Altman wants to raise.
To us here at TradeSmith, this sum speaks to the gargantuan amount of capital set to flow into A.I. stocks… and the race among the world’s top A.I. researchers to achieve Artificial General Intelligence, or A.G.I.
This will mark the point where an A.I. agent, likely one of the large language models like ChatGPT, will be able to “think for itself” by creating solutions to problems it’s unfamiliar with.
It sounds like the stuff of science fiction… And nobody knows for sure when, or even if, it will happen.
But if the top A.I. researchers in the world are prepared to put $7 trillion into accelerating its development, investors should take heed… and find the best companies to get behind as this massive capital wave starts to build.
Luke Lango, senior analyst of Early Stage Investor at our corporate partner InvestorPlace, has been working tirelessly to prepare his readers for this moment.
And tomorrow night at 8 p.m. Eastern, he’s releasing an urgent briefing on when he believes we could see the first rumblings of A.G.I.… and how he recommends investors get positioned.
According to Luke, positions in the right A.I. companies could rise thousands of percent as this takes hold. At the same time, thousands of stocks could get left behind, if not completely wiped out in the aftermath.
It’s a controversial message. But it’s one that affects all of us, and is well worth hearing out yourself.
Now, let’s ratchet down a moment and talk about a relatively smaller number: $7 million…
❖ That’s how much it cost to run an ad to 100+ million people last night…
I’m writing this on Friday morning, so I can’t comment on whether Taylor Swift — I mean, the Kansas City Chiefs — brought it home against the San Francisco 49ers.But what we can talk about is the $7 million average cost to send a 30-second message to the 100-million-plus estimated people who watched the Super Bowl this year. Better make it count!
This sum speaks to the growing nominal costs of, well, everything… Seeing as the average cost of a Super Bowl ad was just $4 million 10 years ago — making for a 75% increase.
But really, it’s the content of those ads that’s noteworthy…
Clearly, companies have caught on to the A.I. trend. Google and Microsoft have already shown off A.I.-focused Super Bowl ads. Google’s promoting the A.I. assistant onboard its Pixel phone line… while Microsoft is putting its Copilot A.I. platform front and center with a 60-second ad spot. My editor tells me that even an ad for a hydration drink company, leaked ahead of the show, references A.I.
It’s all yet another example of big money pushing A.I. toward the masses. Buying shares of either of those leading tech companies I mentioned to ride this trend would hardly be a bad idea.
❖ The Fed’s regional-bank lifeline is running short…
About one year ago, you might remember that a run on Silicon Valley Bank kicked off a short-lived crisis that, at one point, threatened the deposits of millions of Americans.The Fed stepped in with its Bank Term Funding Program — allowing troubled banks to take out a year-long line of credit from the Fed, putting up their beaten-down bond holdings as collateral. That program was enough to stem the contagion.
But, of course, it’s almost a year later… and the program is about to end.
In the spotlight is New York Community Bancorp (NYCB), whose shares have sunk 60% since its earnings report on Jan. 31 where it cut its dividend and divulged losses of $185 million related to an office property on its books.
The timing’s not great, to say the least. And NYCB is far from the only regional bank to tap the Fed’s program.
Is another regional banking crisis in the cards for this year?
Jason Bodner, editor of TradeSmith Investment Report and Quantum Edge Pro, has a unique way of detecting how those “in the know” are responding to any given market event. So I reached out for his thoughts:
I find it hard to believe the Fed would allow a widespread contagion to happen by letting regional banks fail. We are not even at the point of bank failure yet.
There are legitimate concerns. Most people are working at home these days, and office and co-op loans might indeed be in jeopardy. Real estate businesses rely on income like any other.
But with lower demand and a glut of supply, it’s an issue that needs tackling. In busy places like Manhattan, vacant office space can be converted to residential space as there is a still-tight supply keeping rents elevated. But in office parks around the country, it’s not good.
But I’m not overly concerned there will be bank Armageddon. This time last year, the fear of a regional bank collapse arrived almost as quickly as it vanished a few weeks later.
Yes, the Fed came to the rescue, and I would imagine with such a fragile post-Covid economy and the Fed getting ever closer to its inflation goals, the last thing it wants is to make examples out of lenders getting out over their skis. This would not only introduce market volatility, but would seriously dent confidence in the system and promote fear. As we close in on an election year, it is also something President Biden doesn’t want on his hands.
The other reason I am not concerned is there hasn’t been significant financial selling pressure of note. Using my A.I.-powered system, I monitor all buying and selling by Big Money players. Usually they would be the first to sell before the signs of danger appear in the headlines. Look what we see:
I see no recent scary red lines… meaning no one is rushing for the exits — yet.
Compare this to when bank failures riddled the headlines a year ago:
It’s a situation to watch and monitor, but I feel the Fed has too much invested in the economy’s stability in an election year to allow a widespread crisis to unfold.
There are legitimate concerns. Most people are working at home these days, and office and co-op loans might indeed be in jeopardy. Real estate businesses rely on income like any other.
But with lower demand and a glut of supply, it’s an issue that needs tackling. In busy places like Manhattan, vacant office space can be converted to residential space as there is a still-tight supply keeping rents elevated. But in office parks around the country, it’s not good.
But I’m not overly concerned there will be bank Armageddon. This time last year, the fear of a regional bank collapse arrived almost as quickly as it vanished a few weeks later.
Yes, the Fed came to the rescue, and I would imagine with such a fragile post-Covid economy and the Fed getting ever closer to its inflation goals, the last thing it wants is to make examples out of lenders getting out over their skis. This would not only introduce market volatility, but would seriously dent confidence in the system and promote fear. As we close in on an election year, it is also something President Biden doesn’t want on his hands.
The other reason I am not concerned is there hasn’t been significant financial selling pressure of note. Using my A.I.-powered system, I monitor all buying and selling by Big Money players. Usually they would be the first to sell before the signs of danger appear in the headlines. Look what we see:
I see no recent scary red lines… meaning no one is rushing for the exits — yet.
Compare this to when bank failures riddled the headlines a year ago:
It’s a situation to watch and monitor, but I feel the Fed has too much invested in the economy’s stability in an election year to allow a widespread crisis to unfold.
Jason’s take is on point. The Fed likely won’t allow another crisis to erupt, much less in an election year.
If you’re nervous anyway, my advice is simple: Don’t be over-exposed to these banks — either as a depositor or an investor.
FDIC or not, it’s not a bad move to consider moving your savings to a bigger, less troubled bank… and weighting your investment portfolio that direction.
To your health and wealth,
Michael Salvatore
Editor, TradeSmith Daily