Nazaré

In January, while visiting Portugal, the weather conditions favored the rising of the Nazaré waves, allowing us to witness the world’s biggest waves in awe.

Some say that surfing is the art of wave selection.

And some say that AI will turn into the biggest tech wave ever, that the stage is set for a wealth creation cycle never seen before, and thus VCs cannot opt out of this mega wave.

As the Q4 report season kicks off, most of the commentaries so far are that the AI swell is building strong. It is becoming clear that every tech company is developing an AI strategy. Much like mobile technology has become a de facto part of every business, AI is now no longer a category but the core or a component of every product.

* A resurgent IBM reported revenue and earnings in the fourth quarter that beat analyst projections, propelled by accelerating demand for AI. “Our AI platform fuels innovation and leverages other parts of the portfolio. Its book of business for both watsonx and generative AI roughly doubled between Q3 and Q4; in other words, IBM’s AI-related businesses are not just growing but accelerating”.

* ServiceNow beats guidance on all metrics as generative AI powers strong growth. The company is getting close to hitting the $10B annual subscription revenue run-rate milestone, thanks to the incorporation of so many AI features in its products. Many of the new features were rolled out in September and have already delivered a material impact on the company’s bottom line. “We’re seeing the largest net new contract contribution of any product we have ever introduced”. AI is advantageous for ServiceNow’s customers in many ways, for example by delivering a 52% increase in the speed it takes them to design and build new applications. ServiceNow’s CEO said the technology will drive further growth for ServiceNow too, pointing to research that shows how tech customers are expected to spend $3T on generative AI products between now and 2027. He added that 100% of corporate CEOs in a recent survey indicated they are planning to invest in generative AI in the future, and that 70% will either raise more capital or reallocate money from other areas to fund AI initiatives. “The productivity AI delivers is undeniable. The savings will be incredible.”

* SAP shares soar as company restructures and doubles down on AI. SAP has been advancing its restructuring plan that will eliminate or reassign about 8,000 jobs which is intended to accelerate the company’s development of AI features in its products and to “transform its operational setup to capture organizational synergies, AI-driven efficiencies and to prepare the company for highly scalable future revenue growth”.

Conclusion

AI represents a generational shift opportunity, a new canyon for wave formation that will make Nazaré waves look like mere ripples in comparison.