The New Wave has arrived! AI unexpectedly became the savior of the American technology industry.

Last year, as the Federal Reserve began an aggressive interest rate hike cycle, Silicon Valley initiated large-scale layoffs and project reductions affecting tens of thousands of employees in order to cut costs. The Nasdaq Composite Index fell by approximately 30%, and the primary market in the United States, which had been dominated by technology startups for many years, fell into a state of silence. The market once believed that the US technology industry would not be able to escape a crisis similar to the dot-com bubble in 2000, and might even enter a long period of stagnation.

However, at the end of last year, ChatGPT suddenly became the center of attention, and AI technology became the latest buzzword in Silicon Valley and Wall Street. The US technology industry quickly seized this lifeline, resulting in increased stock prices and growth prospects for many industry giants, as well as a large number of startups entering the public eye.

From tech giants and startups to Bay Area real estate, AI saved the US technology industry

Since the beginning of this year, the Nasdaq Composite Index has risen by 32%, far outperforming the 3.4% increase in the Dow Jones Industrial Average. Among the Nasdaq, AI concept stocks have particularly stood out, with Microsoft's stock price rising by 41% and Nvidia, which provides AI chips, almost doubling in value.

Microsoft has invested billions of dollars in OpenAI, positioning itself as a pioneer in AI technology and incorporating the technology into all aspects of its products, from Bing search engine to workplace software. Alphabet-C, as a long-term leader in this field, has released multiple search features based on generative AI.

Amy Hood, Chief Financial Officer of Microsoft, expressed optimism about the returns brought by artificial intelligence:

Like any major platform shift, it starts with innovation, and we're excited about the early feedback and demand we've seen for the AI capabilities we've delivered so far. We will continue to invest in cloud infrastructure, particularly AI-related spending, as the growth demand driven by customer transformation is expected to continue, and we anticipate that the resulting revenue will increase over time.

Alphabet-C CEO Pichai stated:

For Alphabet-C, it all starts with continuous innovation and improvement in search, ensuring that we remain at the forefront in this regard.

Many other companies have also followed the AI trend, fearing being left behind. In the past few years, investors have expected to hear about cost reduction, layoffs, and coping with high inflation during earnings conference calls. However, now investors are more interested in hearing executives' thoughts on how to enter the AI wave. In fact, US listed companies are doing just that. According to data from FactSet, among the S&P 500 companies that held earnings conference calls from mid-March to late May, 110 mentioned artificial intelligence, which is a historical high and about three times the average level of the past decade.

Since last year, many companies have faced pressure from investors to increase profits, leading to waves of layoffs. In the midst of these layoffs, many top talents have already left these companies, providing opportunities for recently established AI startups to poach talent. Investors believe that in the current period of overall economic stagnation in the United States, the new generation of startups is expected to be more efficient than the previous generation of companies, as they require less initial investment in infrastructure. And it can be accomplished with a smaller team. More optimistic individuals suggest that as AI automates many tasks, companies can maintain a smaller workforce and achieve profitability faster.

Wall Street is also shifting from concerns to excitement as AI technology flourishes. SoftBank Group CEO Masayoshi Son stated last month that he plans to end the investment calm period and focus on AI, after being reinvigorated by the ChatGPT chatbot. Son said:

The time for us to counterattack has come, and I hope SoftBank can lead the AI revolution.

AI companies have even brought some boost to the bleak San Francisco real estate market, especially the commercial real estate market. After the COVID-19 pandemic, some communities in the Bay Area that were once favored by tech companies are showing signs of prosperity again.

What challenges will the AI wave encounter?

However, AI is not a panacea, and after this wave of enthusiasm recedes, a number of startups will inevitably exit the stage. Some analysts believe that some startups that raised funds during the financing boom may go bankrupt, and companies that need funding but fail to achieve profitability may still face "massive difficulties" in the future. In addition to the possible difficulty in obtaining future financing, these AI startups also face the problem of insufficient data.

Some analysis points out:

We have seen many companies seeking excellent AI applications, but they cannot access the data that would enable them to build powerful applications, let alone help them with their proprietary data.

In other words, when AI models on the market have become similar to purchasable goods, the real value lies in the data. Having the right amount of quality data may now be more important than ever.

More importantly, how to legally and sustainably obtain this data. Recently, OpenAI, the developer of ChatGPT, has faced two lawsuits in less than a week, one related to data privacy and the other related to copyright.

Despite the foreseeable difficulties, the market is more optimistic about the prospects of the tech industry compared to a few months ago. Some analysts say:

Without the prosperity of artificial intelligence, this would be more like a winter. Artificial intelligence has to some extent saved Silicon Valley's innovation; otherwise, the valley's downturn would have lasted longer and been deeper.