The recent New York Times article (https://www.nytimes.com/2025/01/28/opinion/nvidia-deepseek-ai-valuation-ouroboros.html) comparing Big Tech’s self-investment to the ouroboros myth raises intriguing questions about the valuation of the Magnificent 7. While the article suggests these tech giants might be overvalued due to their perceived safety, a closer look at the AI landscape reveals a more complex picture.
Scaling Laws and Compute Power
Sam Altman and OpenAI have consistently bet on the principle that throwing more compute at model training will yield more intelligent models. This approach while being put to test by DeepSeek’s new models, could still prove correct with improvements in reasoning, alignment with human preferences, and task coherence. The scaling vectors now extend beyond pre-training to include post-training and test-time compute. This ongoing demand for computational power suggests that, unlike the railroad example in the NYT article, we’re not yet approaching natural limits in AI’s growth potential.
AI’s Promise and Delivery
While it’s challenging to objectively assess whether AI will fully deliver on its hype, the rapid progress in capabilities is undeniable. The shift towards compound systems, moving beyond mere model obsession, indicates that we might be on the brink of an impact comparable to that of the internet.
Economic Implications of AI
In considering the potential for an AI-driven boom, it’s worth noting Tyler Cowen’s perspective. In an interview with Dwarkesh Patel, Cowen suggested that the structural gain from AI might not exceed 0.5 percent per year on global GDP growth. However, measuring AI’s impact on productivity is complex, much like the historical challenges in assessing ICT’s influence on economic growth.
Beneficiaries of the AI Revolution
Looking beyond monetary metrics, the benefits of AI extend to our daily lives, enhancing our ability to consume and interact with information in unprecedented ways. From a financial standpoint, each of the Magnificent 7 possesses key assets that could prove crucial in an AI-driven future, provided they remain agile in integrating new innovations.
The potential disruption from Web 3.0 technologies, while currently taking a backseat to AI developments, remains a factor to watch. However, barring major missteps by the tech giants or a revolutionary breakthrough in decentralization, the Magnificent 7’s market dominance seems likely to persist.
So while the ouroboros analogy offers an interesting perspective on Big Tech’s self-investment, it may underestimate AI’s transformative potential. As we continue to witness rapid advancements in AI capabilities, our understanding of its true value โ both in the market and society โ will undoubtedly evolve.
