Allied Advisers is pleased to present our sector update on AI / ML report. Similar to how mobile and cloud adoption rapidly accelerated technology consumption fueling investments and M&A, AI is leading an even more profound wave of transformation in an accelerated time frame as indicated in the report. This will create tremendous opportunities for companies which embrace it, creating new category leaders.
We are witnessing this play out in the public markets; AI infrastructure companies have performed 7.3x better than SP500 companies over a similar time period and AI software companies are up 4.1x over SP500 in the same time period. We have also seen the successes of the generative AI leader OpenAI (valued at $175B in October 2024), a private company that has achieved the rare “hectocorn” (> $100B) status.
M&A and funding activity is also robust in the AI sector, which is covered in this report. Of interest is the resurgence of deals in the semiconductor industry driven by AI. To draw a parallel from history, broadband networking / infrastructure players accrued significant value prior to application players as demand for bandwidth increased after the advent of the Internet. We are seeing similar trends play out today with AI infrastructure/hardware layers being rewarded with huge value; NVIDIA (market cap: 3.4T in October 2024) is currently the second most valuable company and a household name.
Will history repeat itself and AI application layer companies grow even larger than the infrastructure/platform players? We address key opportunities and challenges in the report for deployment of AI applications at enterprise scale. The report also presents exciting areas for innovation, growth and monetization in this industry where the sky is the limit.
At Allied Advisers, we look forward to helping founders and investors navigate this exciting segment.
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