A huge private equity technology investor predicts who will win the AI wave
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In almost every conversation so far this week at the World Economic Forum, generative AI has come up.
In our interviews, informally and informally, Brian Susie and I heard about whether it needs regulation, how companies are integrating it, the speed at which it is moving, and how it is being monetized.
We got a framework on how to invest in it from Robert Smith, founder, chairman and CEO of Vista Equity Partners. The company has about $100 billion in assets under management, most of which is invested in enterprise technology companies.
Initially, he points out that it will be integrated into how companies operate, just like previous innovations like the Internet and the cloud. So how will the money be distributed?
“The first wave will eventually go to hardware vendors,” Smith told us in an interview. “The next wave will be these high achievers” such as Microsoft, Amazon and Alphabet. “The long tail will be enterprise software companies. SMBs are not going to build their own solution tests. They will come to their enterprise software vendors and ask: ‘How can we leverage AI to create more effective and efficient productivity in our business?’
To be fair, Smith is an enterprise software guy, so it makes sense that he sees an opportunity there. Naturally, enterprise software companies echo his sentiments.
ServiceNow CEO Bill McDermott sees demand for generative AI services trickling down to his bottom line. He said the discussions in Davos made it clear that CEOs believe they need to invest.
“These CEOs that are here know that they are investing heavily in technology because generative AI in particular can give them results. It’s not technology for the sake of technology for the sake of technology,” he said in an interview. “This year, $5 trillion will be spent on Technology, mostly software and services. The AI generation is the moment when CEOs no longer think about investing. “They know they have to invest, because if they don’t, and their competitor does, they may not be in business for long.”
However, these CEOs speak by their book. There are others who believe that the hype has gotten ahead of itself. Just as the enthusiasm surrounding autonomous driving has taken longer and more complex to achieve, AI-powered everything may not yet exist.
“2024 is going to be kind of a let-down year for AI,” said Cloudflare CEO Matthew Prince. “I don’t think these products will come in 2024. They probably won’t even come in 2025. I think they will come, but it’s actually going to require us to learn how to do engineering in a different way.”
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