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NVIDIA’s growth is an index on the growth of AI. “Compute revenue grew more than 5x and networking revenue more than 3x from last year.”

Data center revenue totaled $26b, with about 45% from the major clouds ($13b). These clouds announced they were spending $40b in capex to build out data centers, implying NVIDIA is capturing very roughly 33% of the total capex budgets for their cloud customers.

“Large cloud providers continue to drive strong growth as they deploy and ramp NVIDIA AI infrastructure at scale and represented the mid-40s as a percentage of our Data Center revenue.”

For the past few days, I’ve been using the Mac ChatGPT app OpenAI demonstrated last Monday.

It’s unquestionably the future of human-computer interaction. Conversing with a computer is much more natural than typing. Imagine speaking t a colleague with the entire internet at their disposal. But also a verbose colleague without much sense of social cues.

Tapping a keyboard shortcut, the ChatGPT app loads & four little bars reminiscent of Google transcription software appear in the app. You can choose from 5 mellifluous voices who speak fluidly & naturally.

Ramp published its quarterly spending trends & revealed how businesses are spending on AI. There are many great data points that underscore the growth in AI but there are important nuances in the patterns.

First, AI growth rates across the most popular vendors have fallen 78% annually. On average, these AI businesses are growing customer counts 105% ; the median is 38%.¹

On Thursday May 30th at 9:30 Pacific time, Office Hours will host Benn Stancil.

Benn co-founded Mode, a analytics platform acquired by ThoughtSpot. He writes about the future of data & analytics on his blog & asks deep questions about core tenets of software including Do software companies actually have good margins? & Disband the analytics team.

With a unique lens on data & software, Benn will share his views on some of these bigger topics including BI’s third form.

The Theory AI Index of publicly traded companies continue to outperform more classical software companies since we published the index earlier this year.

In addition to the delta in absolute multiple, is there a difference in the factors that drive valuation?

Across the five most important metrics, AI companies’ valuation correlates isn’t that much different than non-AI companies.

When a person asks a question of an LLM, the LLM responds. But there’s a good chance of an some error in the answer. Depending on the model or the question, it could be a 10% chance or 20% or much higher.

The inaccuracy could be a hallucination (a fabricated answer) or a wrong answer or a partially correct answer.

The fastest growing category of US venture investment in 2024 is AI. Venture capitalists have invested $18.3 billion through the first four months of the year.

At this pace, we should expect AI startups to raise about $55b in 2024.

AI startups now command more than 20% share of all US venture dollars across categories, including healthcare, biotech, & software.

Amazon announced their earnings yesterday. Like Microsoft & Google, Amazon’s Web Service business is seeing a surge of growth, up from 13% annual to 17% annual growth (16% when excluding the leap year).

Aside from the overall growth of these clouds increasing, the massive investment in CapEx data centers, power plants, and GPUs is stunning.

These are not one-time investments, but part of a broader trend that started to occur after the introduction of GPT 3 in mid-2020 Amazon was the first to invest significantly.

What drives the acquisition market of startups? It’s the big deals.

In the last decade, the total number of venture backed software M&A by count has remained relatively constant. The black line shows the linear trend across US venture backed companies with disclosed values of $50m or more.

The average & median counts by year total 58 & 55 respectively.

If it wasn’t clear before, AI is the single biggest revenue driver in cloud.

Microsoft’s Azure is winning share directly from Amazon. In Feburary, Microsoft grew 2% & Amazon lost 2%. Google is also taking share - 1% in the last year. A one percentage point share shift represents about $750 million of spend or about $5b in market cap.

“We’re fundamentally a share taker there because if you look at it from our perspective, at this point, Azure has become a port of call for pretty much anybody who is doing an AI project”