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In this edition of Investment Themes, Aletheia Capital explores the potential of AI to deliver the most significant productivity gains since the industrial revolution, and TS Lombard considers whether AI can restore secular disinflation in the global economy.

Meanwhile, Rosenblatt Securities argues the semiconductor cycle going forward will be vastly different from previous cycles because of the exponential growth of AI intensity and this is evident in Nvidia’s most recent results, and Pennock Idea Hub says there are good fundamental reasons for the boom in large-cap tech and AI could be just as disruptive as the internet was in the 1990s.

Aletheia Capital: The missing link; is AI the next great leap in productivity? (May 29)

As participants in the financial markets we all know the power of narratives and how they can often overwhelm logic and scepticism, manifesting themselves in a classic FOMO. Is that what we’re seeing with Generative AI at the moment? Jonathan Wilmot from Aletheia Capital examines this very question and explores the potential of AI to deliver the most significant productivity gains since the industrial revolution, citing academic research as an aid, and providing some caveats to arguments from the productivity optimists who say that we are entering a new age of productivity-aided prosperity. Thought provoking. Click here for the full report. Click here if you would like to speak to the analyst.

TS Lombard: Can AI restore secular disinflation (May 25)

For the past two years there has been an intense debate about whether the world economy is facing secular inflation. TS Lombard’s Dario Perkins has sympathy for a mild version of this thesis based on the idea that important secular shifts – namely deglobalization, climate change, shifting geopolitics, activist fiscal policy and ageing demographics – are likely to deliver a “higher-pressure economy” The big macro question about AI is whether it will flip this thesis on its head and restore the disinflation. That’s the subject Perkins explores in this piece, and while we must concede that forecasting the medium-to-long-term macro impacts is a bit of a ‘’crap shoot’’ Perkins argues that AI is likely to me more of a ‘’dampener’’ to his macro supercycle thesis, rather than to permanently halt its progression. Click here for the full report. Click here if you would like to speak to the analyst.

Rosenblatt Securities: AI driven MOAC confirming case scenarios – doubling secular semi growth (May 1)

Back in 2021 analysts at Rosenblatt Securities published their semiconductor thesis where they coined the term the ‘’Mother of All Semi Cycles’’ This thesis (see here) predicted that the semi cycle going forward would be vastly different from previous cycles because of the exponential growth of AI intensity. Just recently the analysts revisited this thesis in this note ‘’AI driven MOAC confirming case scenarios – doubling secular semi growth’’. The note highlights that the compute requirements for the next phase in AI is massive and with no end in sight. Today’s training of large AI models is easily a $100 million plus proposition that drive the economic proposition to deploy costly custom ASICs and advanced GPU compute platforms such as Nvidia DGX Hopper due to TCO considerations, their analysts say. They share interesting anecdotes and use cases that have been part of their client interactions for the past year that they hope can enlighten and provide a backdrop into a truly big industry/ world phenomenon. Click here if you would like to speak to the analyst.

Rosenblatt Securities: Nvidia – biggest cycle in history – Hopper, AI, full “stack”, lowest cost solution – MOAC baby (May 24)

Rosenblatt followed up the above with this post-Nvidia results note where they said the company basically pulled revenue levels that were 2-3 years in the future. The firm says Nvidia’s epic print and guide on the massive inflection of global generative AI is historical on many levels and consistent with a needed view that there is a secular change in semiconductor growth ahead – what it calls the “Mother of All Cycles” or MOAC. We note that the analyst highlights margins on page 2, where they say non- GAAP gross margins are expected to be 70%, plus or minus 50 bps. This is slightly higher than their estimate of 67.2%. This results in their model estimating an implied non-GAAP EPS of $2.04. This beats Rosenblatt’s/consensus prior estimates of $1.04/$1.07, respectively. Click here for the full report. Click here if you would like to speak to the analysts.

Pennock Idea Hub: Good fundamental reasons for the boom in large-cap tech (May 29)

There are good fundamental reasons for the boom in large-cap tech, namely Artificial Intelligence (AI), says Cam Hui at Pennock Idea Hub. AI has the potential to disrupt the way we work, and it could be just as disruptive as the internet was in the 1990s, he says. During the internet bubble, the shares prices of companies like Cisco and Oracle soared because they supplied the backbone of the internet, according to Hui. Today, NVDIA could be the Cisco and Oracle of the AI era, as it specialises in the production of Graphic Processing Units, the building blocks of AI, he says. If you understand and buy into the disruptive nature of AI, you understand the parallels of NVIDIA with the Ciscos and Oracles of the internet craze of the 1990s, according to Hui. Click here for the full report. Click here if you would like to speak to the analyst.