Gerstner argues intelligence represents the largest total addressable market in history.
“I think the thing that's different is that intelligence is the largest TAM we've ever seen in the history of the world.”
Gerstner says children will own shares in SpaceX, Google, and OpenAI as part of a decades-long journey.
“Owning some shares in SpaceX, in Google, in OpenAI, and in Thropping. And all these companies that we're talking about, this is step one. Remember, this is a journey that will last decades,”
Gerstner says Altimeter considered Cursor the next best lab after Frontier Labs, expecting $10 billion revenue this year.
“I think it was probably the next best lab in the country beyond the Frontier Labs. We thought this company could get to 10,000,000,000 in revenue on its own this year.”
Gerstner argues that token production and consumption is the fundamental basis of all AI intelligence.
“There is no intelligence. There's no consumer chat GPT. There's no enterprise intelligence. There's no clawed code without the production of tokens.”
Gerstner argues software stocks have reverted from premium valuations to market multiples when adjusted for stock-based compensation.
“Software stocks have reverted from a decade long superior multiple to the market to a market multiple.”
Gerstner mentions ChatGPT 5.5 trained on Blackwell chips and Vera Rubin rolling out later this year.
“On new Blackwell chips. We got Vera Rubin rolling out later this year. Notwithstanding all of the noise in the market,”
Gerstner says AI will be bigger than the Internet, the fourth super cycle he has lived through.
“I've lived through four, the Internet, cloud computing, mobile computing, and now we're entering the age of AI. It will be bigger than the Internet itself.”
Gerstner says Altimeter's investment thesis for two years has been correlation to intelligence improvements.
“The overarching theme now for two years at Altimeter is we wanna be positively correlated to improvements in intelligence.”
Gerstner describes the market belief that AI tools can build CRM systems in an hour, threatening traditional software.
“I could tell it what I want, And I can literally have it build a customer relationship management system for my business in about an hour.”
Gerstner says now is the time to find the 10% of beaten-down software companies that will benefit from AI.
“90% of the companies that are down deserve to be down. Find the 10 that got thrown out with the bathwater. Find the 10%, right, that are going to benefit from AI.”
Gerstner argues the AI phase shift is as big as the internet transformation.
“is the phase shift associated with AI? Is the transformation of all computing with now computer assisted intelligence, is it as big as the Internet?”
Gerstner cites Jensen Huang saying half of world's AI researchers are in China and innovating.
“Jensen Huang reminded us recently that 50% of the world's AI researchers are in China, and they're indeed innovating and not copying.”
Gerstner says Google's monthly token generation exploded 100x in a year, from 9 trillion to 980 trillion tokens.
“Today, it's 980,000,000,000,000 tokens. So from 9,000,000,000,000 to nine eighty, it's a 100 x increase in a year.”
Gerstner calculates that 2.5-3.5% annual productivity growth for a decade could substantially reduce the US debt-to-GDP ratio.
“if productivity for the next decade or so was about two and a half to three and a half percent per year, we could achieve substantial reductions in this key ratio of debt to GDP.”
Gerstner says OpenAI reached 400 billion annual searches eight years faster than Google did.
“I did I saw some analysis from my team this week will post that OpenAI reached, you know, 400,000,000,000 annual searches, eight years faster than Google.”
Gerstner cites study showing 40-50% of top US AI researchers are Chinese.
“I saw a study that suggested that 40 to 50% of the AI researchers in The United States, our best researchers are Chinese.”
Gerstner reports OpenAI will exceed $11 billion in revenue this year per recent CNBC disclosure.
“OpenAI, you could see the pacing from the launch of their first consumer product relative to Google and Meta. Sarah just talked on CNBC last week, this year will be over $11,000,000,000”
Gerstner predicts AI super cycle will be bigger than internet, mobile, and cloud combined.
“I think this super cycle is going to be bigger than all the other super cycles put together like I think this is what we're going to be investing again against for decades to come.”
Gerstner links job loss fears from AI to anti-immigration sentiment as predictable response.
“You're a driver, you lose your job to autonomous driving. You know, go through the list, and we're gonna see a lot of this. Right?”
Gerstner argues users are shifting from Google's ten blue links to ChatGPT, Claude, and Apple Intelligence.
“Because people are going to turn to Apple Intelligence instead of 10 blue links to find answers to the questions they have.”
Gerstner asserts Google lost its dominance in the AI era despite dominating traditional search.
“They were dominant in 10 blue links. They are not dominant in this. There are a lot of other players in the age of”
Gerstner says only 5% of Apple users can access Apple intelligence, requiring device upgrades.
“only 5% of Apple users today can access Apple intelligence. So they're going to have to upgrade these devices in order to play.”
Gerstner says GPT-4o is first model to process voice, text, and vision in single neural net like humans.
“This is the first time that we really have a model that reasons across voice, text, and vision in a single model. You know, it's processing all three modalities in a single neural net.”
Gerstner predicts BPO companies face disruption as voice and video modalities threaten their core business.
“BPO companies woke up yesterday and they're like oh my god, this is about voice, this is about call centers, this is about video in, this is about you know?”
Gerstner reports major tech CEO plans 50% revenue growth with 10-20% personnel cost reduction over three years via AI.
“And he said, over the course of the next three years, we'll grow our top line 50%, and we'll reduce our personnel costs by 10 to 20%.”
Gerstner argues people would be more excited about nuclear fission if discovered today than they are about AI.
“if World War II never happened, the atomic bomb never happened, and someone just showed up in 2024 and said, I figured out this thing, it's nuclear fission, people would be like, oh my god, like, probably be more excited than you are about AI.”
Gerstner describes recent AI startup fast failures including Inflection, noting venture returns are now off the table.
“So, we've had what I call these fast failures. You might maybe the inflection team will get their money back, but that's not what Venture is about.”
Gerstner notes Perplexity reversed position on advertising despite previously opposing it, signaling business model shift.
“Perplexity came out and said that they were, you know, considering advertising and they there were statements in their previous releases that were very negative on advertising.”
Gerstner reports some AI models are already priced below cost due to hyper-competitive market dynamics.
“the second thing people said was that the runtime models are just highly competitive and many people think that some of the models are already priced under cost, which goes back to the credit investment theme that you and I have talked about.”
Gerstner says AI has become the leading edge of sovereign battles, making TikTok's status quo path inconceivable.
“So given that, I think it's almost inconceivable for me now to see how TikTok US has a path forward under kind of the status quo.”
Gerstner says we're entering a global AI cold war on the economic front, which he doesn't celebrate.
“So I don't celebrate that we're entering what appears to be a global AI cold war Yeah. On the economic front.”
Gerstner explains Tesla's new FSD model uses driver behavior as the label, not deterministic code for stoplights.
“Now in this new model, it's pixels in. So the model itself has no code. It doesn't know this is a stoplight per se. In fact, they just watched the driver's behavior.”
Gerstner predicts a zone of disillusionment will hit within four quarters as AI adoption takes longer than expected.
“I can absolutely see sometime over the next four quarters. We're gonna hit a zone of disillusionment because everybody's pig piled in here.”
Gerstner believes AI will have a bigger impact on economic productivity than the internet itself.
“my sense here is, you know, and I've said the AI is gonna be bigger than the Internet itself in terms of impact on economic productivity.”
Gerstner claims Meta is the largest AI profit beneficiary in public markets outside NVIDIA.
“They are the single largest beneficiary of AI from a profit perspective in the public markets today outside of NVIDIA.”
Gerstner reports hyperscalers added over $15 billion ARR in the quarter, a record.
“In the quarter, if you aggregate the hyperscalers together, we added over $15,000,000,000 in ARR. That's annual recurring revenue, the single largest quarter in the history”
Gerstner says Altimeter's best AI bets over the past two years were NVIDIA, Microsoft, and Snowflake.
“the best bets on AI over the course of the last eighteen months or two years, we were fortunate to be in, were NVIDIA and Microsoft, Snowflake.”
Gerstner notes NVIDIA traded at 20x earnings last year, its lowest multiple ever.
“So NVIDIA ended last year at 20 times earnings. Its lowest multiple of earnings it's ever traded at, despite the fact that it's the the the purest play AI name in in the space.”
Gerstner says Zillow's Barton immediately red-teamed AI impact on vertical search after ChatGPT launched.
“We're gonna red team blue team AI. What is the impact that AI is gonna have on 10 blue links? What is the impact that AI is gonna have on vertical search?”
Gerstner says Nadella predicted fifteen years before ChatGPT that Microsoft needed answers, not links, to beat Google.
“Fifteen years before ChatGPT started producing answers, Satya knew that that's where they had to get to if they were going to leapfrog Google.”
Gerstner claims AI delivers 30 to 50 percent productivity gains to engineers, unprecedented in technology history.
“If you think about what AI is already doing for the enterprise, we're seeing 30 to 50% productivity improvements in engineers. There's never been a technology history of technology.”
Gerstner says AI is creating massive bottom-line opportunities as companies like Uber continue reducing headcount.
“The re you know, and Dara told you yesterday, quarter over quarter we've actually reduced head count again. Right. We have this massive bottom line opportunity in all these businesses because of AI.”
Gerstner predicts 2024 will see more compute deployed than all previous years combined for AI.
“We're gonna launch more. We're gonna deploy more compute in 2024 than in all previous years combined.”
Gerstner cites Amazon CodeWhisperer reporting 56% increase in engineering productivity from AI coding tools.
“I think Amazon CodeWhisperer, so this is a cogeneration copilot Mhmm. Is reporting that they've seen 56% increase in engineering productivity”
Gerstner reveals ByteDance has 40,000 content moderators and expects 90% reduction via AI within a year.
“ByteDance, where we're investors, has about 40,000 content moderators. Okay? These are folks who are flagging, you know, content that”
Gerstner says GPT has become the default verb for AI, not Google's Bard.
“Do you bard or do you chat GPT? GPT has become the default verb for all things AI.”
Gerstner argues AI follows the 1998-99 internet pattern: overpriced short-term but underestimated long-term impact.
“But much like the Internet in 9899, where there was overpricing in the short run, we dramatically underestimated the impact it was going to have over the preceding decade.”
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“What I would tell you is under 500,000,000, maybe under 600,000,000. Right? Series b and c rounds are as hot as I've ever seen them in data infrastructure and AI and software, etcetera.”
Gerstner frames the $20 trillion question as how the web's open architecture gets rearchitected for AI.
“the $20,000,000,000,000 question is how does the entire open architecture of the web get rearchitected in the age of AI?”
Gerstner says AI extracts knowledge from information to provide copilot assistance for better decisions, unlike the internet's retrieval function.
“What AI allows us to do is extract the knowledge from that information to get a copilot to help us make better decisions.”
Gerstner identifies AI as the third major platform disruption he has managed, following the web and mobile/cloud eras.
“think in moments of major platform disruptions, and this is the third that I've managed through.”
Gerstner says AI is a platform shift as big as internet or mobile, with $10-11B invested across 500 companies.
“I mean, I have to agree with Doug that this is a platform shift on the same magnitude as the internet or mobile itself.”
Gerstner warns AI and ML will increase productivity but concentrate wealth distribution even more than today.
“Global wealth, as measured by the mountain of labor and capital that exists in the world, the conveniences that will be available to people will be better than they've ever been before, but the distribution of those will be way more concentrated”