OpenAI’s ChatGPT: Who Will Benefit from the Hype Around it?
Maxim Manturov, Head of Investment Research at Freedom Finance Europe, shares which companies are likely to profit from the increased discussion of AI and its uses.
At the World Economic Forum this year, Microsoft CEO Satya Nadella said that Artificial Intelligence (AI) would become "mainstream" in "months, not years". Now that AI seems to have reached a point where it can permeate any discussion and any sector, and importantly, can be applied to a wide range of enterprise and consumer applications, we can be sure that tech giants will be looking to invest heavily in AI to remain competitive.
ChatGPT, a chatbot developed by OpenAI, has taken the internet by storm over the past month. Although it is not smart enough to replace humans yet, the bot can respond to natural language prompts and uses past conversation threads and information on the internet to reply to the user. A few days after its launch, more than a million people were trying out ChatGPT.
If an 'AI wars' between tech companies does occur in a bid to be the best, industry leaders providing the technology used to produce AI should reap solid benefits – and profits. Potentially even more than Microsoft or other major technology platforms.
Five major contributors to AI technology
Nvidia (NVDA) is the world leader in artificial intelligence due to its quality product portfolio. The invention of graphic processing units (GPUs) in 1999 was an influential moment in the computing industry. GPUs are essential for AI to achieve its parallel processing capabilities, so Nvidia is still a key industry player decades later and is benefitting from the boom in conversation around ChatGPT.
Interestingly, ChatGPT currently runs on Nvidia's two-year-old A100 chip, not the latest H100 or 'Hopper', which was released late last year. The new chip will supposedly perform AI learning functions nine times faster than the A100 chip and output (the action of an AI responding to a question or other stimulus) 30 times quicker. It also promises 3.5 times better energy efficiency and three times lower total cost ownership. When ChatGPT adopts the new chip, it is clear its capabilities will improve significantly.
While Nvidia's revenue from gaming chips fell sharply in the third quarter from the impact the pandemic had on the video game industry and cryptocurrency bear market, data centre revenue grew by an impressive 31%. With the release of the Hopper H100 chips and the start of the AI wars, we expect Nvidia to produce significant returns in 2023.
ASML Holdings (ASML) manufactures lithography systems which are critical in microchip production and are heavily relied upon by Nvidia to produce their GPUs. ASML has a monopoly on a key technology used in manufacturing advanced semiconductors called extreme ultraviolet (EUV) lithography. After chip companies started producing semiconductors with new advanced specifications, there was a need for the extremely thin lasers that EUV technology contains. With AI continually making advancements, it will require chips that advance with it. ASML technology allows for these advancements and will no doubt increase purchases of its machines.
Taiwan Semiconductor Manufacturing Corporation (TSM) is the world's first dedicated semiconductor foundry and is another significant contributor to Nvidia’s GPU production, giving it a competitive edge. In Q4 of 2022, TSMC produced more than 56% of the world's semiconductors. The management team at TSMC stressed that its high-performance computing segment for AI customers is the reason for its optimism about the semiconductor market recovering in the second half of 2023.
Micron Technology (MU), a memory manufacturer, will benefit from the uptake of AI solutions due to the large amounts of memory and storage it requires. Currently, Micron’s results are in freefall, and earnings are likely to be negative over the next two quarters from the historic slump in PC sales and weakness in smartphones and consumer electronics, which unfortunately have outweighed the delicate supply-demand balance in the memory market.
With limited competition, Micron and SK Hynix have announced drastic cost reductions for 2023, which should help rebalance supply and demand in the second half of 2023. Additionally, Micron achieved technological leadership within its limited competition last year. In the past six months alone, Micron became the first memory manufacturer to release DRAM 1-beta chips and the first manufacturer of 232-layer NAND flash memory chips. As the current leader in this space, and thanks to other market players seemingly cutting back on production, Micron should benefit in the second half of 2023 and beyond as demand for memory-intensive AI servers dramatically increases.
Microsoft (MSFT) invested $1 billion (83m) in OpenAI in 2019, and now the cloud giant is reportedly in talks to invest another $10 billion (£8.34bn) in the company, which indicates great potential in this new and improved AI engine. Last week, Microsoft released the OpenAI service on its Azure platform, which allows developers to incorporate it into their software projects. In fact, Microsoft itself is looking to infuse its current software products, from Office to Bing, with ChatGPT capabilities.
