The Rundown - Deep Dive: Big Tech's AI Land Grab

Episode Date: December 7, 2024

In this week's deep dive episode ofThe Rundown, we explore how Big Tech is positioning itself as a dominant player in the race for artificial intelligence. As tech giants like Microsoft, Amazon, and Meta push to control this next frontier, the Trump administration is taking a hard stance on regulating their power. With antitrust investigations and new policies on the horizon, these companies face increasing pressure to balance innovation with government scrutiny.The content of the video is for general and informational purposes only. All views presented in this show reflect the opinions of the guest and the host. You should not take a mention of any asset, be it cryptocurrency or a publicly traded security as a recommendation to buy, sell or hold that cryptocurrency or security. Guests and hosts are not affiliated with or endorsed by Public Holdings or its subsidiaries. You should make your own financial and investment decisions or consult respective professionals. Full disclosures are in the channel description. Learn more at Public.com/disclosures.Past performance is not a guarantee of future results. There is a possibility of loss with any investment. Historical or hypothetical performance results, if mentioned, are presented for illustrative purposes only. Do not infer or assume that any securities, sectors or markets described in the videos were or will be profitable. Any statements of future expectations and other forward-looking statements are strictly based on the current views, opinion, or assumptions of the person presenting them, and should not be taken as an indicator of performance nor should be relied upon as an investment advice.

Welcome back to the rundown for another weekend deep dive. In today's episode, we're talking about big tech, and they're big plans to dominate AI. There's an AI power grab happening right now, and big tech companies are throwing billions of dollars like its monopoly money to try to become the dominant player in the AI race. So in today's episode, we're going to talk about how these tech giants play such a huge role in our lives and the economy and what moves they're making to dominate the future. And what challenges and obstacles these tech companies might face under a Trump administration? We got a good one for you today. Let's dive in.

It's crazy to think how these tech giants today started off with just humble beginnings. Mark Zuckerberg created Facebook to rate how hot college students were. Jeff Bezos started Amazon and his garage to sell books online. Google was just a couple of Stanford students. And now all these companies are worth trillions of dollars with billions of users all over the world. And they play a huge role in our lives today. But they're not stopping there. They're ready to dominate the future.

and the future seems to be AI. And there's a few key ways that big tech is making moves in AI. The first move is a classic one, backing emerging leaders in the field with huge investments. Microsoft is a good example of this. They poured nearly $14 billion into OpenAI, which is the creator of ChatGPT. They're kind of the company that started this whole AI revolution. Microsoft is by far OpenAI's largest investor. Amazon also isn't too far behind.

They committed nearly $8 billion to Anthropic. That's the startup behind the AI chat. box Claude. Google also invested up to $2 billion into Anthropic to ensure that they don't miss that on the next frontier. But these big tech giants are also working on their own AI thing. Just this week, Amazon unveiled Project Rainier, which is a supercomputer powered by hundreds of thousands of their custom-built AI chips that they're calling Traneum 2. It's a strategic move and a direct challenge to Nvidia, which currently dominates the AI chip market with a 95% share. Amazon wants to have more control over its supply chain, which is why they made their own

custom AI chips. And meta's out here making moves too. Mark Zuckerberg actually took the threads on Friday to announce that meta AI now has nearly 600 million monthly users. On top of that, meta revealed on Wednesday that it's building a massive $10 billion AI data center in Louisiana. That's the largest AI facility that company has ever built. And that's the key takeaway here, right? This AI stuff and developing AI requires billions of dollars of investments. Not many companies outside, out of these big tech giants can afford to spend that amount of money. Amazon is spending $75 billion in CAPEX in 2024. That's up 55% from a year ago.

A lot of that spending is going towards AI. Meta has been on a spending spree as well, recently raising their annual spending forecast to $40 billion. A lot of that going towards their new data centers and other AI related expenses. Microsoft spending in the latest quarter was up 81%. Google spending in the latest quarter was up 62% from a year earlier. I mean, these companies are spending like crazy

because AI isn't cheap. You know, you've got to build infrastructure, you've got to train models. It's like throwing money into a black hole. And there's still some uncertainty about if any of this stuff will ever lead to higher profits. So not many companies can afford to do that. But these big tech companies have highly profitable businesses and essentially endless pockets. And that's why these big tech giants have a strangle hold on AI. They're essentially the only companies that can afford to develop it.

There is a potential huge payoff here. The U.S. military and defense contracts. Talk about an industry with endless amount of. money. Now, we all think about AI as chat box or image generation, but the defense industry is where AI might play the biggest role. All of these top AI companies are now looking to the defense sector because there's some serious money on the table here. Between 2019 and 2022, the U.S. military and intelligence agencies awarded tech companies contracts worth at least $53 billion. This is according to a study from the Watson Institute at Brown. A conservative estimate shows that

between 2018 and 2022, Microsoft Amazon Alphabet alone raked in $28 billion in defense-related contracts. And this is before AI was really a thing. I mean, I can't imagine what these numbers look like these days. And what they'll look like in the future. Even startups are getting involved. Open AI recently signed a deal with defense contractor and Dural to develop AI technology

for defending against drone attacks. And last month, Meta announced that the company would allow the US government to tap into its AI models, for military applications. This is after years of resisting military collaborations in the past. And Amazon, Google, and Microsoft have competed for the Pentagon's cloud contracts for years now, and now AI seems to be the next phase of the collaboration. So expect to see AI play a huge role in the military. The next four years, though, could be pretty interesting because big tech's

dominance might not go unchallenged. Donald Trump is set to take the White House on January 20th, and despite his strong rhetoric on deregulation, Trump has nominated Gail Slater to lead the antitrust division at the Department of Justice. And she's made it clear that big tech's power won't go unchecked. In fact, when Trump announced the appointment on Truth Social, he called out Big Tech saying that Big Tech had run wild for years, stifling competition in our most innovative sector and using its market power to crack down on the rights of many Americans, as well as those of Little Tech.

So that's a shot at Big Tech directly from the next president of the United States. States. As for Gail Slater, she's a former economic advisor to J.D. Vance, who's been a longtime vocal critic of Big Tech, despite his Silicon Valley ties. In fact, here's what he said in a 2021 interview with the Wall Street Journal. Those companies, I do see as fundamentally parasitic on the broader economy. If you think about what Facebook or Apple really does, I mean, what they do is they get people to spend as much time staring at their devices as possible so that they can sell them advertisement. So again, pretty strong comments from the next vice president of the United States, who probably will have some influence on regulations against big tech companies. Now, going back to

Gail Slater, who's going to be leading the antitrust division of the Department of Justice, she previously brought antitrust cases against mergers like Whole Foods and Wild Oaks while at the FTC. And she's going to inherit high stakes cases, including the investigations into Google Chrome and Apple's App Store. Google's already dealing with some challenges. A judge recently ruled that Google illegally maintains a search monopoly and that the DOJ is now pushing for the company to sell its Chrome browser business. Now, if Google is forced to sell Chrome, Google could make between $15 to $20 billion, according to Bloomberg Intelligence, but it could have a significant impact on their ads business. I mean, this case against Google is considered the most aggressive since the antitrust case against

Microsoft back in 2000. And there's some parallels between these two cases. Back then, a judge ruled that Microsoft was abusing the monopoly power from its Windows operating system and called for the company to be broken up. That was later reversed on appeal, but the new rules set in place have influenced competitive dynamics ever since. So it'll be interesting to see how far the new DOJ goes under Trump.

Despite the talks of deregulation, the Trump administration wants to promote competition and innovation, which critics have argued that big tech stifles. So keep an eye out for antitrust cases against Apple, Microsoft, and Amazon, all of which have been hit by lawsuits from the FTC. You know, the government does have a tough balancing act here.

they want to prevent big tech from growing so big and powerful that it starts infringing on people's rights and hurting competition. The government wants the U.S. private sector to remain competitive, but they also want the U.S. to remain the leader in tech innovation as well, especially in the face of rising global threats from China. And right now, the biggest innovations are coming out of these big tech companies. So it's a tough balancing act. We saw the Biden administration invests heavily in initiatives like the chipsack, which is designed to boost U.S. semiconductor production in the U.S. and we'll have to see what the upcoming Trump administration plans to do. But if Big Tech thought that they were going to be let off the hook by Trump,

that doesn't seem to be the case. At least not at this point. Well, all right, guys, that's it for this week's deep dive episode. Thank you guys so much for listening and spending part of your weekend with me. Let us know what you guys thought about this episode in the comments on Spotify and drop some ideas of what you want us to dive into on future deep dive episodes. Thank you guys again for listening. Shout out to Mike for all the help behind the scenes.

Have a great weekend, everybody. We'll see you guys back here on Monday. This is the rundown, your real-time resource for news events and trends in the markets. All views presented in the show reflect the opinions of the guests. You should not take any mention of a publicly traded security as recommendation to buy, sell or hold that security. Run-down guests are not financial advisors and are not affiliated with public holdings or its subsidiaries. You should make your own financial and investment decisions or consult. Respected professionals.

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