Oxygen: Keep the Bait Alive for AI Revenue

July 10, 2024

Andreessen Horowitz published “Who Owns the Generative AI Platform?” in January 2023. The rah-rah appeared almost at the same time as the Microsoft OpenAI deal marketing coup.  In that essay, the venture firm and publishing firm stated this about AI: 

…there is enough early data to suggest massive transformation is taking place. What we don’t know, and what has now become the critical question, is: Where in this market will value accrue?

Now a partial answer is emerging. 

The Information, an online information service with a paywall revealed “Andreessen Horowitz Is Building a Stash of More Than 20,000 GPUs to Win AI Deals.” That report asserts:

The firm has secured thousands of AI chips, including Nvidia H100 graphics processing units, and is renting them to portfolio companies, according to a person who has discussed the initiative with the firm’s partners…. Andreessen Horowitz has told startup founders the initiative is called “oxygen.”

The initiative reflects what might be a way to hook promising AI outfits and plop them into the firm’s large foldable floating fish basket for live caught gill-bearing vertebrate animals, sometimes called chum.

This factoid emerges shortly after a big Silicon Valley venture outfit raved about the oodles of opportunity AI represents. Plus reports about Blue Chip consulting firms’ through-the-roof AI consulting has encouraged a couple of the big outfits to offer AI services. In addition to opining and advising, the consulting firms are moving aggressively into the AI implementing and operating business. 

The morphing of a venture firm into a broker of GPU cycles complements the thinking-for-money firms’ shifting gears to a more hands-on approach.

There are several implications from my point of view:

  • The fastest way to make money from the AI frenzy is to charge people so they can “do” AI
  • Without a clear revenue stream of sufficient magnitude to foot the bill for the rather hefty costs of “doing” AI with a chance of making cash, selling blue jeans to the miners makes sense. But changing business tactics can add an element of spice to an unfamiliar restaurant’s special of the day
  • The move from passive (thinking and waiting) to a more active (doing and charging for hardware and services) brings a different management challenge to the companies making the shift.

These factors suggest that the best way to cash in on AI is to provide what Andreessen Horowitz calls oxygen. It is a clear indication that the AI fish will die without some aggressive intervention. 

I am a dinobaby, sitting in my rocker on the porch of the rest home watching the youngsters scramble to make money from what was supposed to be a sure-fire winner. What we know from watching those lemonade stand operators is that success is often difficult to achieve. The grade school kids setting up shop in a subdivision where heat and fatigue take their toll give up and go inside where the air is cool and TikTok waits.

Net net: The Andreessen Horowitz revelation is one more indication that the costs of AI and the difficulty of generating sufficient revenue is starting to hit home. Therefore, advisors’ thoughts seems to be turning to actions designed to produce cash, magnetism, and success. Will the efforts produce the big payoffs? I wonder if these tactical plays are brilliant moves or another neighborhood lemonade stand?

Stephen E Arnold, July 10, 2024


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