The Week in Breakingviews

There’s no question that financial markets are in the grip of an artificial intelligence frenzy. Tech darling Nvidia’s share price has almost trebled this year on the strength of demand for its data centre chips. Founder Jensen Huang’s 3.8% stake in the $3.6 trillion company is now worth more than the whole of fading rival Intel. Expectations are so inflated that when Nvidia this week indicated that its revenue would grow by a mere 70% in the fourth quarter, compared with 94% in the previous three months, the shares initially dropped by 5%.

Whether Nvidia can keep growing, and how the tech giants which are buying its chips will justify the vast amounts they are pouring into data centres and large-language models, seems to be one of only two topics of conversation among investors these days. The other, of course, is speculating about the economic and financial consequences of Donald Trump’s second presidency.

Yet the excitement about AI contrasts with the mundane ways in which the technology is mostly being used. Many companies are examining how AI can speed up their existing processes or make them more efficient. Yet there are fewer cases of companies using the technology to completely upend or reorder existing businesses. AI’s most impressive scientific breakthroughs, such as when Google DeepMind’s AlphaFold algorithm cracked one of the grand challenges in life sciences, are already a few years old.

There are several possible explanations for this. One is that the expense of training and running large-language models means the early benefits of AI will accrue to big companies with deep pockets. And if the result of applying AI is to make banking, pharmaceuticals, legal services and other industries more efficient, it could further entrench the market power of the leaders in those sectors.

Yet I suspect that - as in the past - the truly imaginative applications of AI will happen outside big companies. And it’s days. Consider that Larry Page and Sergei Brin only founded Google in 1998, three years after the initial public offering of Netscape kick-started the internet boom. Mark Zuckerberg set up Facebook in 2004. Youtube’s founders started hosting internet video the following year. It may be a few more years before we see the new businesses that go some way to justifying the current financial frenzy over AI.

Some things I learned from Breakingviews this week:

1. Of the 11,000 satellites currently orbiting earth, 60% are owned by Elon Musk’s Starlink.
2. Nvidia’s cash pile is bigger than almost half the members of the S&P 500 Index.
3. Each Indian charging station services 135 electric vehicles, compared with just 20 in China and the US.
4. The family of Country Garden Chair Yang Huiyan, once Asia’s richest woman, is selling her private jets to raise money for the property company.
5. Almost a fifth of US households are “accredited investors”, with $200,000 of annual income or $1 million of net worth. In 1989 the figure was just 3%.