The Realities of AI: Are OpenAI and Nvidia Facing a Slowdown?
OpenAI’s recent challenges signal a possible slowdown in AI technology, raising questions about future advancements.
AI Advancements Hit Roadblocks
It has not even been two years since OpenAI revolutionized the tech landscape with ChatGPT, yet emerging signs indicate that progress may be stalling. Although OpenAI’s newest model, Orion, aims to replace GPT and serve as a considerable upgrade, it has failed to meet performance goals. While Orion shows improvements over earlier models, it falls short of expectations, suggesting that artificial general intelligence (AGI) might be farther off than predicted by OpenAI CEO Sam Altman.
OpenAI is not alone in facing these hurdles. A report by Bloomberg highlights that Alphabet‘s latest Gemini model is struggling to meet internal targets. Similarly, Anthropic, seen as a close competitor to OpenAI, is delayed in releasing its updated chatbot, Claude 3.5 Opus.
Image source: Getty Images.
Is the Hype Winding Down?
The main challenge appears to be the difficulty in acquiring substantial new training data. Previous models have tapped resources such as Wikipedia and social media dry. Margaret Mitchell, the chief ethics scientist at AI start-up Hugging Face, commented to Bloomberg, “The AGI bubble is bursting a little bit.”
Until issues surrounding reliable training datasets are resolved, the performance improvements of advanced AI models are likely to stall in the short term. The extent of this slowdown remains uncertain; however, with discussions of an AI bubble circulating, inflated tech stock valuations may be affected.
With large language models (LLMs) experiencing diminishing returns, the AI sector may face declines, particularly impacting Nvidia (NASDAQ: NVDA). Nvidia’s graphics processing units (GPUs), critical for training AI models like ChatGPT, have seen skyrocketing demand since ChatGPT’s introduction. Companies in cloud infrastructure, autonomous vehicles like Tesla, and various AI startups have stockpiled Nvidia’s chips in anticipation of an AI surge.
Despite this demand, a standout “killer app” in generative AI has yet to emerge. While the technology shows promise, its practical applications remain unclear, particularly given its propensity for errors.
Some analysts on Wall Street have voiced doubts about the hefty investments by companies like Alphabet and Microsoft. They question whether the funds spent on capital expenses will yield significant returns, especially when end-user spending on generative AI appears lackluster. David Cahn, a general partner at Sequoia Capital, raised concerns in June about the swelling AI bubble, noting an expected revenue of $600 billion from the AI sector by year-end, while OpenAI is estimated to bring in just $3.7 billion this year, with a target of $11.6 billion by 2025.
Implications for Nvidia and Its Competitors
Thus far, Nvidia’s stock price has remained robust, indicating that investors do not view the news as a significant threat. The company’s stock trades near all-time highs, and the slowdown in LLM advancements does not signal an end to technological progress. OpenAI’s Orion model is currently under post-training, a routine process that refines the model before its expected public debut early next year.
Many alternatives to advancing AI exist beyond LLMs, although this approach has been prevalent among major tech firms since ChatGPT’s launch. Nvidia will announce its third-quarter earnings on Wednesday, and analysts may question the challenges related to AI model scaling and potential consequences for the company.
Analysts project Nvidia will deliver impressive results again, anticipating an 82% revenue growth to $32.9 billion. Presently, the company’s growth trajectory appears stable. Still, if AGI development is further off than previously believed, it may impact Nvidia’s stock in the future.
Top Investment Opportunities Right Now
When our analyst team offers stock recommendations, it’s wise to pay attention. Notably, Stock Advisor’s total average return stands at an impressive 875% — significantly outperforming the S&P 500’s 172%.*
Recently, they unveiled what they believe are the 10 best stocks to consider purchasing right now…
See the 10 stocks »
*Stock Advisor returns as of November 11, 2024
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
