MW How Apple could be an AI winner, says one venture-capital investor active in the sector
By Steve Goldstein
'The tech giants who built empires on weightless bits and bytes are now grappling with atoms,' says investment firm
Investors have greeted the news that Scott Bessent will be President-elect Donald Trump's choice to be Treasury secretary with relief, on the hopes the hedge-fund manager will smooth out the rough edges of the incoming president's policies.
But this year's stellar stock-market returns have less to do with Trump and more to do with hopes for artificial intelligence. Lux Capital counts AI-focused companies including Together AI and Hugging Face in its portfolio, and in its latest letter to shareholders, the New York venture-capital firm discussed how power hungry AI is.
"Today's largest AI clusters use around 100,000 Nvidia H100 chips and consume roughly 100 megawatts of power. Next year's clusters will scale to 300,000 to 500,000 chips requiring nearly a gigawatt of power - about the consumption of a small city," the firm says. That's imposing real physical constraints - "the tech giants who built empires on weightless bits and bytes are now grappling with atoms - steel, copper, water rights, and critically, natural gas," said the firm.
While there have been some AI-fueled nuclear power deals, Lux said "abundant natural gas from the Texas Permian seems a wiser bet" to power AI-related demand.
The firm talked about the need for companies to do more with less. Some of that is talking the firm's book - Together AI makes software to run generative AI workloads more efficiently - but Lux also discussed Apple $(AAPL)$. "Apple has quietly published research showing how to run large language models directly on devices with limited memory. By leveraging novel storage techniques and the inherent sparsity in AI models, the company can reduce memory requirements by 50% while maintaining performance. Advances like these could enable future iPhones and Macs to run sophisticated AI models locally and privately - a development that could radically reshape the entire AI infrastructure landscape," the firm says.
As for as the market as a whole, it notes equities, gold and bitcoin are trading around record highs, bank earnings are ample and credit markets haven't cracked - leading to the conclusion that "higher for longer" is its posture on the cost of capital, regardless of what the Federal Reserve does.
It previously forecast that up to 50% of venture-capital firms would exit the industry, and it said the "inferno" is spreading faster than it imagined, with 25% of active investors from 2023 having already vanished, as 40% of general partners having either cancelled or delayed fundraising for a new fund.
The markets
U.S. stock futures (ES00) (NQ00) rose, while bond yields BX:TMUBMUSD10Y and the dollar DXY fell.
Key asset performance Last 5d 1m YTD 1y S&P 500 5969.34 1.68% 2.78% 25.15% 30.93% Nasdaq Composite 19,003.65 1.73% 2.62% 26.60% 33.35% 10-year Treasury 4.355 -6.60 6.90 47.41 -3.64 Gold 2673.8 2.21% -2.94% 29.06% 32.73% Oil 70.86 2.58% 4.19% -0.66% -5.55% Data: MarketWatch. Treasury yields change expressed in basis points
The buzz
Bessent, Trump's pick for Treasury secretary, has spoken of his belief in a 3-3-3 policy: targeting 3% GDP growth, 3% deficit-to-GDP ratio at the end of Trump's term, and 3 million more barrels of oil production.
Italy's UniCredit launched a $10.6 billion bid for Italian rival Banco BPM.
Zoom Video Communications (ZM) and Agilent Technologies $(A)$ report results after the close of trading.
Best of the web
As Musk assumes deregulation role, Tesla racks up pollution violations.
Junk bonds at risk as emerging markets await Trumponomics.
Bitcoin's rally is making some investors nervous about the stock market.
The chart
RBC Capital Markets introduced its 2025 S&P 500 target, which is 6,600, but perhaps more interesting is its valuation model. That model is a simple regression of trailing price-to-earnings data along with PCE price index, the fed funds rate and 10-year yields. "It's been telling us for the past few years, since we first introduced it, that P/Es can stay higher (i.e., the low 20s) than many investors have wanted to believe (mid-teen levels are often cited as fair value)," say strategists led by Lori Calvasina. "We stress that this model is a compass, not a GPS, which provides a rough guide to appropriate multiples and year-end price levels."
Top tickers
Here were the most active stock-market tickers as of 6 a.m. Eastern.
Ticker Security name TSLA Tesla NVDA Nvidia GME GameStop MSTR MicroStrategy SMCI Super Micro Computer PLTR Palantir Technologies RKLB Rocket Lab USA AMC AMC Entertainment NIO Nio MARA Mara Holdings
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-Steve Goldstein
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(END) Dow Jones Newswires
November 25, 2024 06:34 ET (11:34 GMT)
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