Size Doesn’t Matter

There is some seesawing happening about which is the world’s most valuable company. Apple held that mantle for many years until Microsoft, riding on the artificial intelligence (AI) era that they had prepared for, pulled ahead around the beginning of the year. Recently, Nvidia, which does a fraction of what Apple does in terms of cash flow, became the company with the second-most market capitalisation in the world, ahead of Apple, because they make chips which most think are essential to AI products, and no competitor can breach their moat anytime in the near future. But this week, Apple was on top yet once more and again it had to do with its announcement at its Worldwide Developers Conference that their devices would soon be integrated into generative AI with ChatGPT. The market had long felt that Apple had missed the bus altogether while Alphabet, Microsoft, Meta, OpenAI, which owns ChatGPT, had run miles ahead in the race. By onboarding ChatGPT, Apple removed that gap and probably didn’t have to pay a penny for it because in return, it offered OpenAI access to their hundreds of millions of elite wealthy users.

Imagine, however, what would happen if OpenAI does an IPO, which is going to happen at some point. Both Microsoft and Apple, the richest companies in the world, rely on it for their generative AI offering. It would be among those in line for the most valuable company too. Can it remain there? The entire focus of both Apple and Microsoft will be to become inde­pendent of OpenAI. Such dependency is guaranteed to make them obsolete. Apple has already done it once with processor chips. Intel, a monopoly of sorts for decades, used to make them for Apple until the latter started doing their own. Apple can do that because they have phenomenal amounts of resources to put into it. The moat that Intel built couldn’t hold.

On the other hand, old companies get obscured by new technologies. IBM heralded the computer revolution and stayed on top of it for decades. No one in the 1980s could think it would be just a whisper of the future. Entrepre­neurs who started from nothing like Mark Zuckerberg, who saw the social media revolution, outdid IBM. Nothing ought to be certain about the AI era either. In the beginning, it will look like the heavyweights already in the game have tied up the market and then an obscure corner of the land­scape will force its way into the centre and 21-year-olds will become trillion­aires. OpenAI itself is an example of that. Its founder Sam Altman took a venture from scratch and beat competi­tors thousands of times bigger. The market might have revalued Apple because of AI but it still hasn’t got the game right because it couldn’t accurate­ly predict the future. And if the richest company in the world was unable to, what hope does anyone else have?

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