The Sunday edition #510: Gemini market advantage; DeepSeek...
Every week, we aim to capture what goes on amidst simultaneous transformations in markets, technology, and Earth’s climate – this edition is full of paradoxes. A regulation to reduce ship pollution has accidentally accelerated warming. Meanwhile, Cursor, an AI-based development platform, hit $100 million ARR faster than any company in history. When AI can complete tasks at 1/30th the cost of human labor, even Paul Krugman’s tech bubble comparisons might underestimate what’s coming. Let’s explore.
Bay Area friends! I’m heading to San Francisco next week and will be joining NfX’s Pete Flint for an intimate fireside chat on Wednesday, 12 February at 6pm. We’ll be exploring the themes from today’s newsletter and much more. Grab your spot here – spaces are limited.
Economic Insights
Economists somewhat agree that AI will deliver a significant boost comparable to the impact of computers, if not higher and quicker. A survey by the Fed suggests that between 20 and 40% of American workers are exposed to genAI, indicating the potential for imminent changes.
On stock prices, bubbles are largely psychological. The valuations of the Mag7 are betting on long-term American dominance in AI, which was recently shaken up by DeepSeek. With over $300 billion of AI-driven capex planned for this year, the investment intentions of the Mag7 surpass the telecom bubble of the late 1990s.
Roughly $500 billion was invested in the telecommunications industry between 1996 and 2000, leading to high debt levels and minimal revenue growth. In contrast, AI sales are skyrocketing, with Cursor becoming the fastest company to reach $100 million in ARR, indicating significant market demand.
Market Trends
Markets are not betting on AGI yet despite the potential trillion-dollar opportunity it presents. Google's recent release of Gemini 2.0 Flash at a competitive price point has disrupted the market, undercutting other providers. This move is in response to DeepSeek's aggressive strategies, while Google has simultaneously increased prices for its workspace services.
The industry is witnessing commoditization as competition drives prices down, with value shifting towards vertically integrated applications like Google Workspace and Microsoft's suite. Differentiation will increasingly come from agentic capabilities to justify premium prices amid a competitive landscape.
Climate Concerns
Global temperatures have risen significantly, with a 0.4°C increase in just two years, reaching +1.6°C above pre-industrial levels. This acceleration is partly attributed to a 2020 shipping regulation aimed at reducing sulfur in ship fuel, which inadvertently led to a reduction in cooling aerosols. While this regulation helps lower air pollution, it comes at the cost of a warmer future.
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