The digital economy was crazy-eventful in 2023: Here are my top takes and some predictions for 2024

2023 was a crazy year in big tech and the overall digital economy! From the big bang of ChatGPT to the hoopla around the defenestration (and return) of Sam Altman at OpenAI - and everything in between. If the events of 2023 were anything in the buildup of a tech sequel, we are in for a momentous new year.

Undoubtedly, 2023 was the 'Year of Generative AI'. This is not surprising, as the phenomenon of tech giants like Microsoft, Google, and Amazon investing more in a domain than VCs is in itself indicative. It is estimated that big tech's investments in Generative AI accounted for two-thirds of all investments, topped by Microsoft's $10 billion injection into OpenAI. These investments enabled a domino effect across the tech ecosystem. This includes the illustrious launches and rapid-fire iterations of LLM platforms, the outperformance of industry enablers - notably Nvidia with its data center GPUs, the deliberations on the 'shape and form' of appropriate AI regulations which happened at the highest levels, and even the political schisms at organizational and geo-political levels.

Beyond Generative AI and its eminence, other issues were on the front burner at different times of the year. I have curated six issues that constitute my rewind list for 2023, and form a potent basis for key predictions into 2024. I will share a dedicated issue of my top predictions for 2024 in the days to come.

ChatGPT reaches 100 million MAUs and spurs the Generative AI market

In January 2023 ChatGPT reached 100 million monthly active users, becoming (at the time) the fastest-growing consumer app in history after just two months of launch. This record was of course wrested away by Meta's Threads who achieved this feat within a week.

The ubiquitous applications of mainstream Generative AI applications have been compared to the advent of the internet - a dispensation that transcends even the so-called 4IR. Generative platforms powered by LLMs like GPT-4 by OpenAI, BARD by Google AI, and LLaMA by Meta AI have certainly proven their consumer and enterprise value applicable across virtually all industries. This value has unlocked massive investments estimated to be up to $27 billion for the whole industry in 2023.

OpenAI won the eminence in the market due to its first-mover advantage in launching ChatGPT in late November 2022. Other LLM platforms followed after that but could not usurp ChatGPT's primacy. With Microsoft's investment in OpenAI, the company iterated their LLM to GPT-4 released in March 2023, and made many other functional changes including increasing compute speed in GPT-4 Turbo and launching APIs to create custom GPTs.

With a reported 180.5 million users today, it will be interesting to see how OpenAI positions ChatGPT for growth in 2024. We know that big techs like Google and Meta are ramping up their LLM platforms and will emerge more competitive in 2024. This will not be the only source of competition for OpenAI. The Chinese tech market will produce a global rival for the platform, partly spurred by the regulations restricting the distribution of advanced data center GPUs to Asia. If China goes the distance to produce its chips, it will surely put its weight behind challenging mainstream Generative AI platforms like ChatGPT.

Nvidia joins the trillion-dollar club

On May 30, Nvidia reached a market cap of over US$1 trillion joining the esteemed 'trillion-dollar club'. The outperformance came at the back of the 'Generative AI' boom that spurred the demand for AI data center microchips. In their recent performance report for the third quarter, Nvidia reported a 34% growth in revenues from the second quarter to reach $18,12 billion (a 206% growth YoY). Not surprisingly, this was driven by their data center stream whose business grew by 41% to reach $14.51 billion in third-quarter revenues from the second quarter (a 279% growth YoY). As Nvidia co-founder and CEO puts it,

Our strong growth reflects the broad industry platform transition from general-purpose to accelerated computing and generative AI.

This is what shareholders dream of on good nights! But Nvidia should get ready for growing competition in 2024. Semiconductor incumbents like AMD and Intel will focus their strategies in the data center GPU market, non-traditional players like Google, Amazon, and Facebook have already begun developing chips for their LLM projects, and US geopolitical embargos on the distribution of chips to China will compel local production there. All these forces are likely going to 'chip away' from the 92% market share that Nvidia has in the data center market segment.

I have already outlined my propositions for Nvidia's continued competitiveness in a comprehensive article here.

A landmark congressional hearing on Generative AI risk and regulation

I wrote an edition earlier in 2023 proposing key next steps in unlocking value for the Generative AI industry. One of the key pillars in the sustainable growth of generative technology and the overall acceptance of the industry is getting the regulation right. On May 16 Sam Altman appeared before a US Senate Judiciary Subcommittee on 'Privacy, Technology, and the Law' to answer questions on the "Oversight of A.I.: Rules for Artificial Intelligence".

Interestingly (for me at least), the thrust of this hearing was largely on the Generative AI technology and industry, than it was about OpenAI and ChatGPT. Additionally, the posture of the hearing was that of industry leaders calling for more regulation on the technology than the conventional protest to the contrary. This particular stance by Sam Altman and others will prove significant in 2024 and beyond. By calling for more regulation, the Generative AI industry will have a collaborative relationship with governments and key lawmakers. Hopefully, this collaboration will enable robust research in AI safety and allow regulatory bodies to be abreast of the technology's advancement.

I predict that we will see a lot more of these strategic hearings in 2024. Perhaps these conversations will happen a lot more between lawmakers in the US and the EU, and platform organizations like OpenAI, Meta AI, and Google AI.

Apple reaches $3 trillion market cap

Apple stock gained 48% in June to reach $193 per share and close at a market ap of just over $3 trillion. The first ever company to do so.

Unlike Nvidia, whose growth in valuation came on the back of a general business boom, Apple's drivers weren't clear. Outside the launch of new standard iterations of their PC and iPhone products, and the promise of the Apple Vision Pro mixed-reality headset scheduled to hit the market sometime in early 2024, no product innovation is attributable to this growth. In fact, Apple's YoY revenue to September 2023 dipped by 2.8%, compared to the 7.8% increase in the 2021 to 2022 season.

This market cap milestone, as I predicted then wasn't going to be sustained by relying only on the vagaries of the stock market. Apple might be the biggest tech business in the world today, but the pressure for innovation is high. Hopefully, the Apple VisionPro, when it comes, will reinvigorate the Apple ecosystem in 2024.

As of today, Apple's market cap has dipped to $2.89 trillion and fallen behind Microsoft's value.

Meta launches threads - 100 million users in 5 days, but...

On July 5 Meta launched Threads, evidently styled as a direct competitor to then Twitter. It quickly amassed 10 million users in only a few hours after launch, and more impressively reached 100 million users in less than a week. This feat wrested the 'fastest growing app in history' status from ChatGPT who had achieved the 100 million user milestone in two months.

This early success was partly attributable to the easy sign-up process which was virtually non-existent for Instagram users who only needed to sign in and agree to import their existing follower base. While the platform topped at about 50 million daily active users for Android users worldwide, that number is reported to have fallen to around 10 million by the end of August as post-launch momentum was lost. This compares poorly to the 237.8 million base that X reports today as its "monetizable daily active users". What did Meta get wrong with Threads?

Market commonality is tough to achieve in the online social platform space. My argument obviously, is that to compete with an entity you have to be playing in nearly the same psycho-social market. Online platforms have always appealed to fundamentally different social groups and conversations. Instagram thrives on showbiz type of content that is served by celebrities, TikTok is a 'talent show' platform that is served by 'native platform celebrities' (those that found fame only on TikTok), and X is a news and conversation platform that discusses topical issues shared by opinion leaders. This proposition, of course, is debatable. But this makes it difficult for the entire online social market to be considered as a single red ocean.

Additionally, this makes it tough for new entrants to challenge the primacy of existing platforms - as was sought out by Zuckerberg's Threads against X. That the initial network effects were largely based on Instagram users did not help this case. It is users who define a platform's content posture, despite its corporate strategy and product design. But who can blame Zuckerberg? It was easy to see an opportunity as Musk's X lost ad revenues by up to 54% and monthly active users dropped by 18% on the back of moderation changes that sought to "ensure freedom of speech". As Zuckerberg put it,

I've thought for a long time there should be a billion-person public conversations app that is a bit more positive

Creating a new "billion-person" platform that hosts "more positive" conversations will require more than a single sign-on strategy with a Meta marketing budget and rudimentary platform functionalities. If Meta does not wind out buying X - which is a conversation I envision Musk willing to have in 2024 as company value has slumped by more than 50% since his takeover, it has to embark on a robust strategy for Threads that wins over conversation leaders and implements solid functional moderation mechanics. I have written before about how these mechanics are important for online social platforms to thrive here.

Twitter is renamed to 'X'

On July 23, Twitter was officially renamed to X. Beyond Elon Musk's apparent obsession with the letter 'X' as his age-old ingrained branding psyche, this change was posited (rather desperately) as a strategic business intent. As X, the platform would be morphed into an "everything app" that will incorporate "comprehensive communications" and the ability to conduct "entire financial" services.

The 'everything app' does make echoes of a super app, with financial services augmenting traditional social media functionalities as is popular in Asia with platforms like WeChat and Alipay. The core commercial proposition for online social platforms, as advertising agents, didn't (and still doesn't) seem to be holding up too well for X. It has been reported that their ad revenues have declined by up to 54% YoY from 2022 since the $44 billion acquisition by Musk. This does necessitate a radical strategic repositioning in search of a sustainable business model for X.

Many people questioned the wisdom in the name change, restricting the conversation to a mere marketing rebrand, a media stunt, or even an impulsive ownership flex by Musk. But X is a business. And the enterprise is inundated with the obligations of sound business decisions. The decision to 'open up' X's moderation stance and "ensure freedom of speech" may have played to the law of inverse consequences in so far as their ad business is concerned, but the imperative for growth and sustainability is real. Especially so in the red ocean of Meta's platforms, including their launch of Threads in July 2023 styled to challenge X's business directly.

Beyond monetizing the blue check mark and APIs, X will be focused on redefining their entire business model. This is likely to entail an implementation of robust content subscription services and a repositioning as a global payment system. The integration of e-commerce as a revenue stream is also not far-fetched. X's Head of Business Operations, Joe Benarroch was reported as saying, that X is an

evolving NEW global business with multiple revenue streams. We are not Twitter any longer and not measuring ourselves by old Twitter metrics...

OpenAI hits leadership turbulence

On November 17, OpenAI's board announced the sacking of CEO Sam Altman in what later played out as a Hollywood-type corporate showdown. The board stated that Altman had not been "consistently candid" with them. This cryptic statement by the board raised many questions about the political play at OpenAI. The board which included co-founder Ilya Sutskever, had lost trust in Altman.

As we know, Microsoft offered to hire Altman, OpenAI president Greg Brockman, and any OpenAI employee willing to make the move. In the days that followed, facing a potential mass exodus and implosion, OpenAI reinstated Altman as CEO and changes happened to the board.

It is hard to say how this drama will affect the short-to-medium-term development of the Generative AI industry and the impact it will have on the running of OpenAI as an industry leader. One thing that stands out for me is how fragile the Generative AI landscape is right now. We know how important Altman's leadership has been for the industry. Especially so if we look at the post-launch success of ChatGPT, the US congressional hearing of May 16 with Sam's advocacy for robust AI regulations, and the progressive work at OpenAI ambitiously focused on achieving AGI. The implications of OpenAI's work being potentially in jeopardy with the defenestration of Altman is scary. Single-man frontiers are sufficient for advancement as we've seen over the last years with Steve Jobs, Bill Gates, Elon Musk, and others, but the Generative AI industry can benefit from a lot more 'leadership capital' bootstrapping in 2024 and beyond.

Conclusion

The digital economy is set to be momentous in 2024. Outperformers like Microsoft and Nvidia will seek to consolidate their market leadership. The focus on the Generative AI market will continue as this has proven to be a nascent industry. We will see a more fierce fight among big tech's LLM projects, albeit with a more enterprise (than consumer) focus.

Other domains will come into play. The autonomous vehicle market will present a strong competitive landscape, especially between Tesla and Waymo. We will see a more aggressive go-to-market approach by Starlink, particularly outside the US market. Online social platforms will continue the war for more ad revenues and yet better moderation systems. I will be particularly curious to see how X, handles these issues.

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Happy New Year!!! Best wishes for 2024.