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”
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 says AI is a platform shift as big as internet or mobile, potentially bigger.
“I have to agree with Doug that this is a platform shift on the same magnitude as the internet or mobile itself. In fact, it may be bigger than both of those.”
Gerstner compares foundation models to search engines in 2000, saying value capture is uncertain.
“It is almost impossible to know with any certainty, much like it was with the search engines in ninety nine, two thousand, who's going to emerge, where the value capture is going to be.”
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 says AI is bigger than the Internet because it extracts knowledge rather than just retrieving information.
“when we say it's bigger than the Internet itself, what we mean by that is the Internet really allowed us to discover information, to retrieve information.”
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 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?”
“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 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 contends GPT has become the default verb for AI, not Google's Bard.
“So what is the verb in the age of AI? 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.”
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 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 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 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 predicts 80% of AI benefits over next three to four years will go to incumbent platforms, not venture startups.
“I think 80% of the benefits of AI over the course of the next three to four years are going to inure to the benefit of the incumbents, to the larger platforms that are already public today whose businesses will get better. Their bottom line margins will expand. Their top lines will reaccelerate.”
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 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 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 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 declares Meta the single 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. And so I really think it's about that.”
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 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 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 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 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 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 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 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 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 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 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 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 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 states Google was dominant in 10 blue links but is not dominant in the new AI era.
“They were dominant in 10 blue links. They are not dominant in this. There are a lot of other players in the age of What”
Gerstner's survey work shows people are turning to ChatGPT, Claude, and Apple Intelligence over traditional search.
“We do lots of survey work on this, Scott. People are turning to chat GPT, they're turning to Claude, they're turning to, why are we so excited about Apple Intelligence?”
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 notes four coding AI companies each raised over $400 million, questioning sustainability of further funding rounds.
“There's four companies in the coding AI space that raised over 400,000,000 each. You you think there'll be another round behind that?”
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 says US productivity growth fell from 2.5-3% in 90s to 1.8% in 2000s to slowest ever in last decade.
“if you look at the 90s our productivity growth in The United States was about 2.5% to 3% a year, okay, and then in the 2000s it slowed down to about 1.8% and then the last ten years has been the slowest productivity growth”
Gerstner reports Google confirmed AI-enhanced search results monetize at the same rate as traditional search results.
“one of the key questions there was whether or not the AI enhanced search results were gonna monetize at the same level as non AI enhanced search results.”
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.”
“OpenAI made a lot of sense to us, you know, they just reported last week over 400,000,000 weekly active users, I think over 700,000,000 monthly users growing fast, etcetera.”
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 says tariffs and AI create diverging company outcomes requiring active stock picking over index investing.
“So active managers get paid right now to do their job, find those companies that are gonna benefit, and avoid the companies that are gonna get hurt.”
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 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 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 argues it is too early to regulate AI, comparing premature regulation to regulating auto industry out of existence.
“I think we definitely are in the camp that it is way too early to obstruct American AI with you know useless regulations like we don't even know what we should be regulating.”
Gerstner forecasts OpenAI could reach $5-10 trillion valuation as the AI winner in consumer and enterprise.
“right, 5 to $10,000,000,000,000 business in the fullness of time, which frankly would not surprise me for the winner in the age of AI, right? The winner in consumer and a big company and enterprise,”
Gerstner says AI will need regulations like seatbelts took forty years, but it's too early now.
“It took us forty years to realize we needed seat belts and airbags and that we needed speed limits and things like that and we'll need all those things for AI but I think it's way too early to be doing that”
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 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 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 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 explains belief that Claude Code or OpenAI Codex can build CRM systems in an hour.
“There's a belief in the world today that I can just go to Claude Code or I can go to Codex at OpenAI.”
Gerstner explains investors aren't penalizing software companies for missing current numbers but reducing terminal value due to AI uncertainty.
“I'm gonna pay less for those future free cash flows. I'm not penalizing them because they're missing their numbers today.”
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 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 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 says Anthropic posted the most parabolic revenue numbers in the history of capitalism.
“If Anthropic had not shown up with the most parabolic revenue numbers in the history of capitalism That shocked the history.”
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 says Anthropic added two Databricks and one Palantir worth of ARR in April alone.
“Remember, that's two Databricks and one Palantir, okay, in a month that you're adding in terms of annualized revenue.”
Gerstner asserts no one is better at turning electrons into tokens than Elon Musk beyond launch and Starlink.
“There's no human being on the planet that is better at turning electrons into tokens than Elon Musk. Right? Let me say that again. Because we focus a lot on the launch business.”
Gerstner says Musk building data centers and acquiring team from Cursor is a game changer for SpaceX IPO.
“Him building the data centers which are gonna power all of AI and him then using those to train up his own AI with incredible team, that he acquired from Cursor, I think is a total game changer for the IPO and puts them in a really”
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 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 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.”