AI At The Frontier – A Stock Picker’s Take on Tech and AI investing | The Bid podcast

Summary

In this episode of The Bid, Oscar Paleo sits down with Tony Kim and Michael Gates from BlackRock to explore the rapid evolution of AI and its investment implications. Drawing from their 12th annual tech tour in Silicon Valley, they discuss frontier AI, exponential growth in compute and intelligence, and the merging of software, labor, and services. The conversation also covers emerging technologies like quantum computing, the escalating cybersecurity arms race, and the societal impact of AI on work and productivity. The episode highlights unprecedented opportunities and challenges, emphasizing AI as a transformative force reshaping technology, markets, and daily life by 2030.

Takeaways

• 🤖 AI has evolved rapidly from chatbots to frontier AI, exhibiting capabilities approaching superintelligence and expanding across multiple applications.
• 💻 The AI investment landscape is structured into three layers: infrastructure (chips and data centers), intelligence/models, and applications/services.
• 📈 AI infrastructure investment is massive, projected to reach trillions of dollars, representing approximately 0.5% of global GDP.
• ⚡ AI growth is exponential, with improvements in chip technology and model intelligence potentially yielding thousands of times better capabilities by 2030.
• 🏆 Leading companies dominate the AI space due to 'power law' dynamics, where winners continue to grow faster unless structural changes occur.
• 🌐 AI’s influence extends beyond technology sectors, impacting a wide range of industries and services globally.
• 🧠 Frontier technologies like quantum computing and humanoid robotics will complement AI, solving new types of problems and enhancing capabilities.
• 🔒 Cybersecurity is a critical concern, as AI creates new attack vectors, requiring continuous defense strategies and arms-race-level vigilance.
• 👥 AI will transform society and the workforce, automating labor, reshaping work, and enabling humans to focus on higher-value tasks.
• 🚀 The next few years, up to 2030, are expected to be a period of unprecedented innovation, integrating AI, quantum computing, and physical intelligence.
• 📊 Active portfolio management is essential to identify winners in the AI revolution, as not all companies will benefit equally from the exponential growth.

Q & A

What is the main focus of the tech tour discussed in the transcript?

The tech tour focuses on exploring advancements in artificial intelligence, meeting with technology leaders in San Francisco and Silicon Valley, and identifying investment opportunities across different layers of the AI technology stack.

How has AI evolved in the past year according to Tony Kim?

Tony Kim explains that AI has shifted from chatbots and basic agents to frontier-level AI, encompassing super intelligence and applications that extend into the physical world. The scope and capabilities of AI systems have expanded significantly.

What are the three layers of AI investment opportunities described in the transcript?

The three layers are: 1) Compute and infrastructure (chips and data centers), 2) Intelligence and models (AI algorithms and models), and 3) Applications and services (software applications and labor/service integration).

Why is AI infrastructure considered such a significant investment?

AI infrastructure, including chips and data centers, represents nearly half a trillion dollars in annual investment and could grow to over a trillion in coming years. This investment is foundational because more compute enables more intelligent AI systems, creating an exponential growth cycle.

What is the concept of 'AI at the frontier'?

'AI at the frontier' refers to AI systems operating at the edge of what is currently possible, showing rapid, nonlinear, and exponential improvements in capabilities, particularly at the chip and model intelligence layers.

How does Michael Gates view the importance of technology in portfolio management?

Michael Gates emphasizes that technology, particularly AI-exposed companies, delivers superior sales and earnings growth. Having a view on technology allows active managers to identify companies with positive earnings revisions and significant growth potential.

What is Tony Kim's outlook on humanoid robots?

Tony Kim predicts that humanoid robots could progress from capabilities equivalent to a young child today to highly functional systems by 2030, combining advanced AI intelligence with mechanical improvements.

How does quantum computing relate to AI according to Tony Kim?

Quantum computing represents a new computing platform that can solve problems in nature, chemistry, biology, and materials science that classical computers cannot. It complements AI by providing new types of data that can enhance AI systems’ intelligence.

What are the main cybersecurity challenges with AI?

As AI becomes more sophisticated, attackers can use AI to create new attack vectors, increasing cybersecurity risks exponentially. Defenders also leverage AI, leading to a continuous arms race between offensive and defensive AI systems.

How does the transcript describe the societal impact of AI?

AI is expected to change the nature of work, automate tasks, and enable humans to focus on their passions. Discussions on societal impact, including labor and productivity shifts, will likely become more prominent in future years.

What is the significance of the 'power law' in the tech sector?

The 'power law' refers to the observation that the biggest companies with strong AI adoption continue to grow faster and dominate the market. This explains the underestimation of winners and the concentration of success among a few leading companies.

What future topics does Tony Kim anticipate for the next tech tour in 2026?

Tony Kim expects discussions to focus on super intelligence, AI embodied in physical systems, and the societal impacts of AI on work and daily life, highlighting the continued exponential change in technology.