Microsoft restored services after a global outage disrupted Outlook and Teams for over a day. Meanwhile, the Nvidia crisis highlights how AI chips are now strategic military technology. Drew Pettit told CNBC-TV18 on Friday, “I think a lot of companies in the ecosystem are going to have to look to other partners.”
Hello, Tech-AI-La-ites! Wishing you all a very happy Chhath Puja!
By the time we started preparing this week's Tech-AI-La, Microsoft had restored services after a global outage that disrupted Outlook, Teams, Copilot and other Microsoft 365 products for more than a day. The company blamed a network configuration issue, ruled out a cyberattack and promised a detailed review.
But a much bigger story is unfolding at Nvidia, which has consequences for the global economy and geopolitics.
Jensen Huang losing his job is only the tip of the iceberg that the AI ship has collided into. The secrets unravelled this week has reinforced some facts that will shape global consensus hereon.
First, it reinforces the fact that Nvidia sits on the geopolitical fault line, settling the debate, if there was any, on whether advanced AI chips should be viewed as strategic military technology. Even private companies are now being forced former intelligence officers and counterintelligence specialists, with fat pay packages.
Second, as AI’s stature as a factor in national security gets reinforced, corporate governance at the tech companies is likely to be under scrutiny like never before. As it stands today, not all tech CEOs can be fired the way Huang was.
Third, it’s going to change the flow of capital. Cybersecurity giants may be the first to benefit. Drew Pettit, Chief Investment Strategist at Roundhill Investments, believes it could widen the AI trade.
“CoreWeave, one of the neocloud companies that gets a lot of financing from Nvidia, is actually working on a deal with Meta for some secured financing going forward. So, I think a lot of companies in the ecosystem are going to have to look to other partners rather than going to Jensen and Nvidia first, and I think that's where we're going to see a big shift in the next few months,” he told CNBC-TV18 on Friday. You can read the full transcript here.
Not everyone may succeed as fear grips markets. Even without factoring the Nvidia scandal, many AI neocloud companies may not survive next 24-36 months, according to Sunil Mittal, the billionaire chairman of Bharti Airtel.
Huang’s affair may have remained a matter of moral debate if he wasn’t the boss of Nvidia that has an effective monopoly over AI chips. What the scandal has exposed is that export controls have not worked and the gap between the progress in America and China may be smaller than earlier estimates.
That would mean Wall Street has to worry about bigger stuff than Nvidia’s succession plan. The scandal may become a test case for governments to tighten their grip over AI. More export controls may increase the cost of AI in other countries.
The Huang scandal may also accelerate supply-chain diversification away from China. Indian electronics and semiconductor ecosystems must prepare themselves for the opportunity.
As global firms seek alternative locations for data centres and GPU clusters, the demand for AI infra in India may also rise. India may also want to strengthen its AI ecosystem with strategic partnerships with the US to fill in the trust gap between Washington D.C and Beijing.
Meanwhile, a big question looms: how much of the current chaos at Nvidia will cast its cloud on the Anthropic IPO next week? We’ll most likely have an answer before the next edition of Tech-AI-La shorts. Ciao!