<\/p>\n
Those profits might be much lower in the future than bulls expect, however, writes Louis-Vincent Gave, CEO of Gavekal.<\/p>\n
Investors, Gave argues, are falsely viewing the AI trade through the lens of the smartphone revolution\u2014and the extraordinary profits that Apple enjoyed from it.<\/p>\n
In reality, AI development is more capital intensive, suggesting \u201cthe future profitability of AI products may be nowhere near as high as the profitability that a company like Apple enjoyed through the smartphone rollout boom,” he writes.<\/p>\n
\u201cIt is absolutely not a given that the AI profits will be captured by a handful of companies. Instead, the profits (assuming there are any!) will likely be diffused among many companies, and even countries.”<\/p>\n
To Gave\u2019s last point, China is much more important in AI than it was in the early days of the smartphone. China simply wasn\u2019t a global tech player the way it is today, meaning it\u2019s a mistake to think that Chinese products can\u2019t move the needle.<\/p>\n
Big Tech companies in the U.S. have been pushing their closed-system AI, but\u2014as markets painfully learned at the start of the year with DeepSeek\u2019s advances<\/a>\u2014China\u2019s open-source AI can\u2019t be ignored.<\/p>\n At the moment, it\u2019s unclear which model will ultimately dominate, but the high valuations of U.S. AI stocks implies that it\u2019s a given that they will carry the day.<\/p>\n \u201cGavekal never tires of pointing out, \u2018when China enters a room, profits walk out.\u2019” Gave writes. \u201cEssentially, the valuation of a lot of AI-related names listed in the U.S. implies that China will faceplant on its AI hopes and aspirations. This may be the right bet, but is it a 100% bet?”<\/p>\n