A tide in the affairs of mammon
A paradigm shift is under weigh.? At first blush, a seismic tremor appears to have jolted the technological landscape. Tremors cause tsunamis which wreak havoc on boats. Ignore the headlines. We are not witnessing a tsunami.
DeepSeek, a nascent Chinese artificial intelligence startup, has unveiled its R1 model, an open-source marvel that rivals Western counterparts in performance while boasting a development cost of merely $5.6 million—a pittance compared to the hundreds of millions expended by U.S. tech giants.
The immediate aftermath was brutal. Nvidia, the American titan whose chips are the lifeblood of AI applications, witnessed a staggering 17% plunge in its stock value, erasing $589 billion in market capitalization—the most significant single-day loss in U.S. market history.? The contagion spread, with tech behemoths like Microsoft and Alphabet also suffering notable declines.
This upheaval prompts a critical examination of the prevailing orthodoxy in AI development. The model's efficiency, operating on less powerful hardware and utilizing less data, suggests that innovation can thrive without colossal investment—a notion that may unsettle Western firms accustomed to lavish spending.
A more positive story is emerging. Abundant Intelligence stands poised to reshape the global economy, yet estimates of its potential impact vary significantly. PwC projects that AI could contribute up to $15.7 trillion to the global economy by 2030, surpassing the combined current output of China and India. In contrast, McKinsey's analysis suggests that generative AI alone might add between $2.6 trillion and $4.4 trillion annually across various sectors.
The disparity in these projections underscores the uncertainty inherent in forecasting AI's economic influence. Optimists (guilty as charged) envision a surge in productivity and the creation of new markets, while sceptics caution that the benefits may be unevenly distributed, potentially exacerbating existing inequalities.
Go with the flow. One of those two opinions is more likely than the other. If intelligence becomes abundant and cheap, that should level the playing field and ameliorate inequality. New technologies create far more value for the user than they do for the tech companies. The aggregate market value of the so-called Magnificent Seven represents the present value of that sliver of profit that the shareholders might capture. That's a stock worth, what, $11 trillion? These companies trade at chunky multiples to one year's earnings. By comparison, global GDP exceeds $110 trillion. That's an annual flow.
Much of that GDP would evaporate without the technologies that were nascent to non-existent at the turn of this century. I'd be willing to wager that the likelihood that abundant intelligence will spur advances in productivity in many industries just went way up.
The winners in the age of abundance will be those who make the best use of thinking models, not those who develop them. This rising tide will lift boats not swamp them.
Ike Udechuku | Cofounder | Pathway