Is the AI Boom Real?

For the past three weeks I have been traveling through Japan and the United States.

This trip has been part sight-seeing and part learning tour with the goal of understanding more about the AI and AI chip boom landscape outside of Taiwan.

Now that I am finished with the big conversations, I wanted to sit down and share a few thoughts.

The Trillion

There’s been a lot of news about a chip venture thing that Sam Altman of OpenAI is working on for the AI industry.

The news came slowly. First there was the report - released at around the time he was temporarily ousted from OpenAI - that he was raising money from Middle East investors for some chip venture. Back then it was just "billions".

Since then, you have also gotten news that Sam Altman and his team have talked to TSMC, people at Abu Dhabi, and the US Government.

Just as I was leaving Tokyo for San Francisco, the WSJ broke the report with that eye catching $1-7 trillion figure that has got everyone buzzing. It was one of the first things that I started asking people about when I arrived in Silicon Valley.

Many people agreed with me that the number is a bit too much. Perhaps it can be a negotiating tactic to set expectations for future talks. Once you start talking trillions then hundreds of billions no longer feels as substantial.

Then you have the Information adding a bit of context to Altman's remarks, saying:

> But in reality, Altman privately has told people that figure represents the sum total of investments that participants ... would need to make, in everything from real estate and power for data centers to the manufacturing of the chips, over some period of years.

The ecosystem concept makes a lot more sense. Total semiconductor sales in 2023 were about $520 billion. Total capital expenditures - according to the trade group SEMI - were about $140 billion.

But even if we were to assume that this trillion is spread out over five years and diluted with real estate expenses and power, that is still another COVID-like step function upwards in capital expenditure.

The semiconductor industry is a conservative one. Many of the people there are old-heads who have seen many a cycle of booms and busts downstream. Sam isn’t really the first guy to knock on a foundry’s door ...