GQG Partners' Brian Kersmanc on Tech's Inflection Point and AI Monetization Challenges

Tech's Inflection Point and AI Spending

• 💡 Brian Kersmanc of GQG Partners identifies a significant inflection point in the tech sector, primarily due to a limited monetization of substantial AI infrastructure spending.
• 💰 Despite $600 billion spent on AI infrastructure, revenues generated are only in the $20-30 billion range, indicating a disconnect.

Cloud Market Dynamics and Pricing Pressure

• ☁️ Spending has heavily concentrated in the cloud, leading to lower barriers to entry and aggressive pricing among cloud providers.
• 📉 Companies like Oracle are undercutting major players such as AWS and Azure by 40-70%, with rental costs for compute power, like Blackwell chips, dropping significantly.
• ⚠️ This intense price competition, combined with a lack of AI monetization, suggests a potential lack of headroom and unsustainable growth.

Investor Skepticism and AI Project Success Rates

• 📊 An MIT study indicated that 95% of AI deployments were found to be useless, with no acceptable use cases identified.
• 🎯 Similarly, a consultant reported that only 15% of 400 AI projects showed positive results, casting doubt on the widespread efficacy of current AI implementations.

Chip Availability and Market Expectations

• ⚡ Despite narratives of high demand, H200 chips are selling at 30-40% discounts and appear readily available, suggesting more capacity than publicly acknowledged.
• 📈 This potential oversupply and lack of demonstrated monetization create nervousness about current market expectations for the AI sector.

Pervasive Market Impact of AI Narrative

• 🌍 The AI narrative has become pervasive, influencing best-performing assets globally, from semiconductor and memory stocks in Korea to industrial companies in Europe.
• 🏦 Even US banks have seen increased activity in capital raising and M&A advisory for AI-related ventures.
• ⚡ Utilities, particularly non-regulated ones, have benefited from perceived AI-driven demand for power, but this could reverse if demand falters.