The AI Factory: The Decade of Opportunity
10x in Tech | 8x in Energy | 20x in Materials | 32x in Crypto | Avoid Bonds
In the next decade, AI presents a $100 trillion opportunity, as highlighted by Jensen Huang, the CEO of NVIDIA. To put this into perspective, the entire global equity market today stands at $115 trillion, with 16% concentrated in technology. If this concentration grows to 25% through mergers and acquisitions, the equity market could reach $460 trillion in a decade. This implies a 10x opportunity for tech companies and around a 3x opportunity if you invest in the S&P 500.
The AI Factory. NVIDIA.
But it's not just about AI. The rise of AI, electric cars, smart cities, and crypto demands substantial electricity. Currently, the energy sector comprises just 8% of the equity market. If this doubles to 16%, the energy market could soar from $9.2 trillion to $73.6 trillion – an 8x growth. This shift presents an excellent rotation and hedge against inflation for tech investors.
S&P500 Cold War 1.0 (Blue) Vs Cold War 2.0 (Red)
This AI-driven transformation is embedded in a new macro and geopolitical setting. We are witnessing a new cold war where the US and China compete for technological supremacy, key supply chains, and strategic materials. The AI and electricity revolution will drive demand for critical materials like copper and uranium. This heightened demand, coupled with potential geopolitical disruptions, could lead to significant supply chain issues and price spikes, resulting in tremendous geopolitical volatility.
Currently, materials make up 1.6% of the equity market. If the supply and demand imbalance is substantial, the materials sector could grow to 8% of the equity market in a decade, translating to a market worth $36.8 trillion – a 20x opportunity.
One of the most intriguing sectors might be crypto. Blockchain technology, initially lacking real use cases, finds synergy with AI. The convergence of AI and crypto could transform many industries. For instance, if AI algorithms with advanced natural language processing capabilities combine with blockchains to collateralize users’ credit histories, the role of traditional banks could be questioned. Crypto incentivizes the creation of Web 3.0 infrastructure.
AI will also lead to significant breakthroughs in biotechnology. However, protecting the privacy of our genetic information becomes paramount. Blockchain technology acts as a safeguard against the centralization of AI by corporations or autocratic governments.
Digital assets, an emerging asset class, could rise from 2% to 16% of the equity market, matching the energy sector. This would result in a market worth $73.6 trillion, representing a 32x upside.
Thanks for reading,
Guillermo Valencia A
Cofounder of Macrowise.
West Palm Beach
July 31st , 2024