About this Video

• Video Title: The best way to play AI is to buy the big hyperscalers, says Lead Edge Capital's Mitchell Green
• Channel: CNBC Television
• Speakers: Mitchell Green
• Duration: 00:08:01

Introduction

This CNBC interview features Mitchell Green, founding partner of Lead Edge Capital, discussing the best investment strategy in the AI sector. Green advises against directly investing in leading AI companies, suggesting instead that retail investors focus on the major hyperscalers (like Microsoft, Amazon, Google, and Facebook) heavily investing in AI development.

Key Takeaways

• Invest in Hyperscalers, Not Individual AI Companies: Green's core advice is to invest in large tech companies (hyperscalers) massively investing in AI, rather than smaller, independent AI companies. The argument is that the hyperscalers' massive resources make them more likely to succeed.
• High Costs and Dilution in Private AI Companies: He highlights the substantial costs and potential for significant dilution in private AI companies due to continuous fundraising.
• Hyperscalers' Advantages: The hyperscalers possess significant financial resources, allowing them to attract top talent and outcompete smaller firms. They can offer large salaries and stock options, leading to greater talent acquisition.
• Potential for AI Commoditization: A concern is that AI technology might become commoditized, similar to past tech trends, impacting the success of individual AI companies.
• Market Uncertainty: Despite current bullishness in the market, Green emphasizes the inherent uncertainty, likening the situation to the dot-com bubble.

Here are the answers to your questions 1 through 4, based on the provided transcript:

1. What specific examples of capital expenditures did Mitchell Green cite from major hyperscalers in the AI space? Mitchell Green mentioned that Amazon planned to spend $60 billion (or more) in the second half of the year, following $56 billion in the first half. He also stated that Google intended to spend $85 billion. While not explicitly stated as capital expenditure, Facebook's (Meta's) large investment is implicitly referenced through the context of its overall size and growth, along with the large sums spent on talent acquisition.

2. What are the specific risks associated with dilution mentioned by Green regarding private AI companies? Green points out that private AI companies are constantly fundraising, which leads to significant dilution of existing shareholders' equity as more shares are issued to new investors. He states that the dilution in some of these companies is "absolutely insane."

3. How does Mitchell Green compare the current AI investment landscape to past technological trends like the dot-com bubble? Mitchell Green believes the current AI investment frenzy is similar to the dot-com bubble, suggesting that people overestimate near-term technological change and underestimate long-term impact. He implies that many AI ventures may not survive, similarly to many dot-com companies.

4. What was the anecdote about the healthcare company and doctors' reaction to AI cost-sharing that Green mentioned? Green recounted that a healthcare company is making doctors partly responsible for the costs of implementing AI tools aimed at improving efficiency. The doctors are reportedly unhappy with this cost-sharing arrangement.