The $1 Trillion AI Buildout | State of Markets

David George (0:00)

Eight of the top 10 valued companies in the world are US tech companies.

Sarah Wang (0:05)

Since JOTGBT came out almost four years ago, the market's up 90%, which is 17% annualized. The natural instinct is, well, that's gotta come down. We're definitely in a hot period.

Santiago Rodriguez (0:13)

This puts us in a new age of atoms. Global infrastructure investment needs are estimated at $90 trillion through 2040 This goes way beyond AI and data centers. It includes power, water, roads, transit.

Alex Immerman (0:29)

Live deployments at S&P 500 companies, that's at 69%. Now, if you go to the ultimate barometer, which is a metric tract over time, that's actually only at 2%.

AI is generating major revenue and savings. On the other hand, adoption is still extremely early.

Santiago Rodriguez (0:46)

Today's opportunity is so much around taking these capabilities and harnessing them to build reliable services.

David George (0:54)

That's all great, but is it a bubble?

SPEAKER_5 (0:58)

AI is driving one of the largest investment cycles in modern history. But is the spending getting ahead of the economics? Today David George, Sarah Wang, Santiago Rodriguez and Alex Immerman walk through 25 key charts from our latest State of the Markets presentation.

They start with the macro picture. Why markets have risen even as multiples have come down. How hyperscaler CapEx is approaching $1 trillion a year. And why demand for compute continues to exceed supply.

Then they look at what's happening inside businesses.

AI adoption is growing, but measurable enterprise impact is surprisingly early. At the same time, power users are pulling away. Agents are consuming more tokens. Inference costs are falling. And the fastest moving companies are finding ways to turn those improvements into both growth and better margins. And finally, they look at what comes next. From consumer agents and robotics, to autonomy, AI, and biology. And the next wave of enterprise adoption.

David George (2:01)

Welcome back to the A16z Podcast. I'm David George. I'm here with my colleagues, Sarah Wang, Alex Immerman, and Santiago Rodriguez. Today, we are walking through 25 key slides from our latest State of Markets presentation.

The earnings behind The Markets Rise, the scale of the AI buildout, the evidence of growing adoption, and what this cycle means for hardware, software, and the next generation of private companies. We'll explain what the charts show and discuss what we're seeing inside businesses along the way, so you can follow along whether you're watching or listening. So Sarah, Alex, Santi, thanks for joining me.

Alex Immerman (2:40)

Of course. I'll see you here.

David George (2:41)

Okay, so the day this podcast goes live, we will be releasing our State of Markets presentation. So this is a now yearly tradition from our growth team where we synthesize the biggest trends in tech, AI, infra, and markets. Today, we're just picking out a subset of interesting slides and having a discussion about them. So I would direct you to look at the whole version, which has filled with a lot of nuggets. The areas that we're going to discuss today are macro. So where we'll talk about capbacks, data centers, accelerating demand at a high level, and then on the ground takeaways where we will discuss models, apps, and some vertical deep dives.

Technology is driving an economy-wide investment boom with rising earnings, supporting market gains, and AI demand, pushing infrastructure spending far beyond earlier forecasts. Hyperscalers are investing all of their near-term operating cash flow to build out this capacity for demand that continues to outstrip supply in almost every case that we see.

They are channeling this investment into chips, power, cooling, construction, skilled labor, and much more. This expansion coincides with a broader need to modernize physical infrastructure, creating opportunities across industries, and potentially lowering shared costs for businesses and households.

So with that, let's jump in.

Okay, first slide. Tech is the everything cycle. So some of this may be a little bit obvious, but the numbers are somewhat striking at this point, right? So high-tech equipment, software, and R&D now account for roughly 55% of US capital spending, which is just a staggering number. Tech is driving the investment cycle, obviously, across all areas of the economy. From software and models to power construction and industrial capacity, tech is almost 40% of the aggregate value of the whole stock market in the US. And eight of the top 10 valued companies in the world are US tech companies. So this is a broad story. You're seeing it in CapEx. This is heavily covered in the data center buildout. It's obviously heavily covered in the amount of capital that's been going in to fund the model development, model companies together raising, I think, over $350 billion at this point. And just to put it in a very deep historical context, because this is probably the analogy that we've seen the most of, this buildout just surpassed railroads as a percentage of GDP. So exciting times, massive buildout. We all happen to think that if you fast forward five to seven, maybe 10 years from now, we'll be looking at these numbers and they'll probably be 20x higher cumulatively.