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AI Wave Gaining Momentum
“May you live in interesting times” - an old Chinese saying commonly interpreted as an oblique curse, but in today’s context, we are lucky to experience an era of breathtaking innovations and wondrous progress. Accelerating technological advancements are powering unprecedented changes across industries. Just this month, Neuralink released videos showing how its brain implants can help quadriplegics play chess and video games controlled by thoughts. SpaceX successfully launched the third test flight of its Starship rocket, the largest ever built. Apple released its Vision Pro AR/VR headset, arguably the most advanced and user friendly to date.
However, the most prominent story in 1Q24 has been the AI wave seemingly gaining momentum across the board. Generative AI continues to push the boundaries of what we thought possible in terms of creativity and innovation. AI models are becoming increasingly proficient at generating realistic images, text, code, and video – these capabilities promise to revolutionize industrial processes, product design, operations, and collaborative innovation.
Major market indexes saw strong gains in 1Q24, with the S&P 500 and Dow Jones Industrial Average, gold, and Bitcoin reaching new all-time highs. Inflation remains elevated above recent historical levels, while the U.S. Federal Reserve sees three rate cuts coming before the end of the year. The IPO market began to show signs of recovery, with well-received market debuts from fabless semiconductor startup Astera Labs and Reddit. In the view of one top banker, “The last two transactions usher us out of a sober, clinical market into a lean-in market. The economy is stabilizing, and AI is a secular theme creating a lot of momentum.”
According to CB Insights, AI startups raised a total of $42.5 billion across 2,500 equity rounds in 2023. Though this represented a decline of 10% from the prior year, AI fared better than overall VC funding, which declined 42%. Generative AI startups attracted 48% of all AI funding, an increase from 8% the prior year. Valuations for early-stage AI companies in 2023 were substantially higher than non-AI startups, even into the mid-stages as well — AI startups raising Series B rounds saw valuations over 1.5x higher than non-AI companies.
AI's long-term value creation potential appears to be orders of magnitude greater than prior transformative technologies. Forecasts from Next Move Strategy Consulting estimate the global AI market will grow from $208bn in 2023 to $1.85tn in 2030. McKinsey estimates that generative AI could contribute up to $4.4 trillion annually across 63 use cases. A recent analysis from ARK Investment Management forecasts that AI could have a cumulative GDP impact of 130% through 2030, dwarfing the next largest GDP impact – 25% from the introduction of the steam engine from 1830 to 1910.
Analytics and Generative AI were highlighted in major user conferences and industry events. At the Emerson Exchange user conference, the company shared its vision for “boundless automation, " encompassing a comprehensive connection between cloud, edge, and field devices. A key focus is embedding more analytics on edge devices and embracing software virtualization. Bosch, at its Connected World conference, announced an expanded partnership with Microsoft focused on using generative AI to improve automated driving functions to make them as safe as possible.
By far, the biggest AI event was NVIDIA’s GTC Developer Conference, dubbed the “Woodstock of AI” by one analyst. The company’s Graphic Processing Units (GPUs) chips were originally designed to accelerate graphics for gaming and video. However, they have also emerged as being uniquely suited to AI– and the company has achieved over 80% share of the AI chip market. From a financial perspective, the company’s growth has been staggering – in its 4Q23 earnings results, NVIDIA reported $22.1 billion in revenues, a stunning 256% increase over the prior year period. NVIDIA is now the third largest company in the world by market capitalization, which at $2.3tn is greater than the market value of chipmakers TSMC, Broadcom, Samsung, AMD, Qualcomm, and Intel combined.
NVIDIA’s conference emphasized the increasing democratization of AI, with a particular focus on making AI tools and technologies more accessible to individuals and organizations worldwide. The company’s latest chip, Blackwell, has more than double the transistors of its predecessor. Performance gains make it four times faster for training, 30 times faster for inference, and 25 times more energy efficient. In partnership with Siemens, the company showcased how AI is accelerating industrial automation, leveraging the Siemens Xcelerator and NVIDIA Omniverse platforms. As an example, NVIDIA demonstrated the virtual replica of a complete warehouse operation, including inventory, workers, and workflows, enabling operators to optimize operations and immediately respond to real-time disruptions. The company’s CEO Jensen Huang’s messaging highlighted the mission to enable “AI Factories” through its portfolio of chips, platforms, and services.
Source: NVIDIA
Infrastructure is also emerging as a growing priority for investors. On January 12, global asset manager BlackRock announced that it would pay $12.5 billion in cash and stock to acquire Global Infrastructure Partners (GIP), an infrastructure asset management firm. Infrastructure assets, including pipelines, toll roads, and airports, naturally lend themselves to operational improvement and optimization through digitalization. As an asset class, infrastructure offers resilient income and capital appreciation across market cycles, delivering higher returns than other alternative classes.
At Momenta, we remain committed to advancing innovation across Digital Industry by supporting talented entrepreneurs who execute great ideas. As we look forward to 2Q24, the AI wave shows no signs of slowing as powerful breakthroughs emerge in manufacturing, autonomous vehicles, supply chain, logistics, agriculture, and technology. As author William Gibson reputedly said, “The future has arrived; it’s just not evenly distributed yet.”
Momenta is the leading Industrial Impact venture capital firm, accelerating digital innovators across energy, manufacturing, smart spaces, and supply chain. For over a decade, our team of deep industry operators has helped scale industry leaders and innovators to improve critical industries, the environment, and people's quality of life.
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