The task of building Artificial General Intelligence is said to be on a scale similar to the Manhattan Project.  Sam Altman, head of OpenAI, made reference to the Manhattan Project when his company was developing the now famous ChatGPT product (did he notice the irony in that analogy?).  AI will dramatically change how we live and work.

In her book, Empire of AI, Karen Hao details her view that one consequence of AI is that the gap between the powerful and everyone else will widen.  The power/influence of the largest technology companies (i.e. the hyper-scalers) will continue to grow.  Meta, Amazon, Alphabet, and Microsoft will spend approximately $320 billion this year on AI.  These hyper-scalers are spending more money on AI data centers than all the others combined.  And they are hiring the best talent from the smaller upstart companies.  Good luck to those trying to compete with them!  

Their investments are working.  The market capitalization of these four companies ranges from $1.8 trillion to more than $3 trillion!  As a comparison, the market-cap of Walmart is $760 billion.

The gap between today’s powerful leaders that run the AI companies and to the rest of us is also widening.  Those running the hyper-scalers see their wealth growing at the same time that many others struggle to pay their rising utility bills thanks in part to AI’s need for energy and water.  This year, electricity bills for some 67 million customers are projected to surge by over 20 percent in 13 states from Illinois to New Jersey, the region with the most AI data centers.  Closer to home, NV Energy is expanding their infrastructure to provide power for two Alphabet data centers.  Will Nevada residents be competing with Alphabet for electricity? 

And what about jobs?  Many workers, especially entry level white color workers, are at risk of being replaced by cost-saving AI tools.  Look no further than to Microsoft, which has laid off 15,000 employees this year without seeing a drop in their strong financial performance.  While they say efficiency gains from AI were not a predominant factor in the layoffs, they acknowledge that over the long term AI will reshape jobs at Microsoft and everywhere else.  AI will boost productivity and profits, but are most people better or worse off?  I wonder.

When it comes to AI there is another kind of power:  the power needed to run AI.  That will be the subject of my next article, including investment ideas.   

David Vomund is an Incline Village-based Independent Investment Advisor.  Information is found at http://www.VomundInvestments.com or by calling 775-832-8555.  Clients hold the positions mentioned in this article.  Past performance does not guarantee future results.  Consult your financial advisor before purchasing any security.