The Tech Tectonic Shift of 2024: A New Global Economic Landscape Driven by AI

The Tech Tectonic Shift of 2024: A New Global Economic Landscape Driven by AI2024 undeniably saw Artificial Intelligence (AI) become a central theme across numerous sectors. Nvidia, the global leader in GPU manufacturing, saw its market capitalization soar past $3 trillion, second only to Apple, highlighting the crucial role of GPUs in AI development

The Tech Tectonic Shift of 2024: A New Global Economic Landscape Driven by AI

2024 undeniably saw Artificial Intelligence (AI) become a central theme across numerous sectors. Nvidia, the global leader in GPU manufacturing, saw its market capitalization soar past $3 trillion, second only to Apple, highlighting the crucial role of GPUs in AI development. Despite growing competition, Nvidia's GPU sales growth significantly outpaced its main rival, AMD. This growth fueled substantial increases in capital expenditure by Nvidia's clientscloud providers and numerous AI startupson building data centers for AI model development and operation.

Tech giants like Amazon, Microsoft, Google, and Meta collectively increased their capital expenditure by 50% in the first three quarters, exceeding $150 billion. This massive investment yielded a significant direct effect: a dramatic decrease in large language model usage costs, exceeding an 85% year-over-year reduction. However, 2024 remained a year of waiting for IPO market recovery for many private tech companies. For the past three years, startups raised consistently more funding through secondary offerings to private investors than through IPOs. Meanwhile, the cryptocurrency industry experienced notable development in 2024, with the approval of Bitcoin exchange-traded funds (ETFs) marking a significant milestone. Furthermore, Donald Trump's return to the White House, promising four years of looser regulations, potentially boosted the cryptocurrency industry but also exacerbated US-China tensions, posing a threat to companies with significant revenue from the Chinese market.

Seven charts detail the tech transformations of 2024:

Chart 1: Nvidia's Data Center Business Reaches Nearly $100 Billion in 12-Month Revenue

Nvidia, leveraging its GPU market dominance, continues to lead the AI chip market. These chips are core components in AI development. In the twelve months ending October, Nvidia's data center business (including GPUs and networking equipment) generated nearly $100 billion in revenue, a 66% year-over-year increase. This strong financial performance ignited investor enthusiasm, pushing its market cap above $3 trillion. Key clients include cloud providers and numerous AI startups, such as Elon Musk's xAI, all relying on Nvidia's chips to train and run large AI models. In the fierce GPU market competition, Nvidia's growth significantly outpaced its main competitor, AMD. In the twelve months ending September, AMD's data center business reached $11 billion in revenue, a roughly 54% year-over-year increase. However, Broadcom, designing custom AI chips for companies like Google, Apple, and OpenAI, emerged as a strong competitor. With $12.2 billion in revenue from custom chips and networking equipment, a staggering 220% year-over-year increase, Broadcom highlights the growing customer demand to reduce reliance on Nvidia.

Chart 2: Top Four US Tech Giants Exceed $150 Billion in 9-Month Spending

Major tech companies are heavily investing in new data centers to support their AI initiatives, with further expenditure increases anticipated. Amazon, Microsoft, Google, and Meta collectively spent over $150 billion in capital expenditures in the first nine months of the year, a 50% year-over-year growth. All four giants predict further capital expenditure increases next year. For instance, Meta, in its latest investor report, stated that its infrastructure spending will "significantly accelerate" beyond the already projected 43% growth this year. Amazon, traditionally focused on expanding its distribution network (warehouses), reported that its recent spending growth is "primarily driven by investments in technology infrastructure." The next challenge for these giants is demonstrating how these massive investments in computing and software actually help their clients become profitable.

Chart 3: AI Large Model Usage Costs Plunge 85%

The cost of using generative AI models has dropped dramatically, opening up new application possibilities, from intelligent coding assistants to "model routing" services that help clients optimize for the most cost-effective model. The cost of using models at the level of OpenAI's GPT-4 has fallen by over 85% since early 2023. This is due to AI startups improving model efficiency and reducing operational costs, as well as improved hardware utilization (through "batching" strategies) as customer numbers increase. However, this downward trend may stall in 2025. In December, OpenAI launched a professional version of its chatbot at a monthly subscription of $200, ten times the price of the current premium ChatGPT. This professional version targets users tackling more complex problems, using reasoning models that generate more accurate answers by extending computation time. Soon after, OpenAI released its next-generation reasoning model, o3. While impressive in performance, researchers revealed that each task costs over $1000. With the rise of reasoning models, 2025 may mark an "inflection point" in the AI industry. Well-funded developers can leverage reasoning models to solve complex problems taking days or weeks, while resource-constrained teams will struggle to keep pace.

Chart 4: AI Startups Raise $81 Billion in Funding, a 41% Year-Over-Year Surge

Early 2024 witnessed a surge in AI investment in ventures built upon the advancements of OpenAIs ChatGPT. This momentum continued, with many founders recognizing the advantages of operating outside the framework of large technology companies. According to PitchBook, by mid-December, AI startups had raised $81 billion, a 41% increase over 2023. AI and machine learning startups accounted for 41% of total US investment, up from 36% the previous year. In Q4, this sector nearly captured half of all US venture capital. Mega-rounds highlighted this boom. For instance, OpenAI secured $6.6 billion in September, while xAI received $6 billion in May and another $6 billion the following month, reaching a pre-money valuation of $45 billion. Investor enthusiasm for AI is reflected in continued support for startups. For example, AI search engine Perplexity underwent multiple funding rounds this year, accumulating nearly $800 million, according to company statements and insiders, catapulting its year-end valuation from $1 billion to $9 billion.

Chart 5: Private Funding for Tech Startups Again Surpasses IPOs

2024 saw a persistent downturn in the IPO market. Except for a few companies like ServiceTitan and Reddit, most tech startups opted for private market funding rather than going public. Many companies used funding to repurchase shares from employees and existing shareholders, providing liquidity while easing the pressure to go public. Several notable tender offers dominated the year. For example, Figma raised $900 million, while Canva secured over $1.5 billion through share sales. The result: funding raised through tender offers in 2024 again exceeded IPO funding, marking the second time in three years.

Chart 6: Bitcoin Price Breaks $100,000, Total Market Cap Nears $2 Trillion

Trump's 2024 election victory fueled market frenzy, pushing Bitcoins price above $100,000 for the first time. The cryptocurrency, created by the anonymous developer Satoshi Nakamoto in 2008, reached a total market capitalization near $2 trillion. Bitcoin doubled in 2024, far outpacing the Nasdaq Composite's 35% annual return. Investor enthusiasm for Bitcoin and other cryptocurrencies stemmed largely from expectations of favorable regulatory policies under the Trump administration. Trump had pledged to make the US the "global capital of cryptocurrency." The Bitcoin price surge was also fueled by the launch of the first Bitcoin ETFs in January. These ETFs, from firms like BlackRock and Fidelity, allowed investors to easily invest in Bitcoin like stocks. To date, these 11 ETFs have attracted over $110 billion in assets.

Chart 7: US-China Tensions Impact Multiple Tech Companies

US-China tensions are impacting the revenues of numerous tech companies. This impact could worsen if Trump implements plans to significantly increase tariffs on Chinese goods. AI chip giant Nvidia is particularly affected. The US has banned exports of its most advanced chips to China, and China launched an antitrust investigation into Nvidia in December. Despite this, China still accounts for approximately 17% of Nvidia's revenue. Nvidia is not alone; other tech companies face similar challenges, including chipmakers like Qualcomm and Marvell, chip equipment manufacturers like Applied Materials and Lam Research, and electric vehicle maker Tesla. Tesla's sales in China have declined consistently in the first nine months of the year. Of particular note is Cirrus Logic, an audio processing chipmaker focused on Apple iPhones, which reported that China accounted for over 60% of its revenue in the fiscal year ending March.