r/valueinvesting
The next AI bottleneck might be intelligence sovereignty
"Intelligence sovereignty" is the next AI bottleneck, boosting demand for local stacks, private deployments, hyperscalers, and OEMs.
- Non-US governments and strategic industries will push for local AI stacks, increasing global infrastructure demand.
- Enterprises in sensitive sectors will shift towards self-hosted and private AI deployments.
- Inference providers, neoclouds, hyperscalers, and OEMs will benefit from the need to run models privately.
I wrote a post about something I think investors are underappreciating in the AI trade.
Most of the AI discussion the past few years has been about investing in bottlenecks (compute, memory, optics, power, etc.). But the recent Fable / Mythos restrictions made me think the next bottleneck could be something different. I call it intelligence sovereignty (and Jensen calls it sovereign AI).
The basic idea is that hosted frontier intelligence can suddenly be restricted by either the vendor or by the government.
That has a few downstream implications:
- Non-US governments and strategic industries will push harder for local AI stacks, even if the models are somewhat worse
- Open-source models become more strategically important, but may also stop keeping pace with the closed frontier
- More companies will look at self-hosted / private AI deployments, especially in sensitive sectors like cybersecurity, biology, defense, etc.
- This is a boon for inference providers, neoclouds, hyperscalers, and OEMs that can help enterprises run models privately
- It may also weaken the assumption that US frontier labs automatically become the default intelligence layer for the rest of the world
- Countries that don't have frontier intelligence will need to make up for it in inference time compute & manpower (to steer weaker models)
Now, some of the names that benefit from this trade might be the same as the current AI bottleneck trade.
Full piece here: https://eastwind.substack.com/p/fable-in-shackles
My bottleneck is also intelligence so I feel the AIs pain
Doesn't really matter what you think. If you want to narrow it down just to LLMs then coding is a great example of efficiency gains already being seen. 👍🏼
If you have not seen the improvements in AI in the last 12 months and how those differ hugely from the changes from 24>12 months ago or 36>24 months ago and how there are actual use cases now, unlike before, then you really must lack the imagination needed to use it. You can't use it to replace you, but you can use it to speed up massive amounts of repetitive tasks, and unlike 12-24 months ago, it is now way more reliably useful in deeper, analytical tasks.
I mean, hey, if you want to make an argument that maybe the market is getting a little too excited? Sure, but "Ai is giant hype without much tangible economic value" reads to me more like burying your head in the sand. Again, like I said, you and I must not be seeing the same models, or one of us must have our eyes closed.
The roi that AI spend is counting on does not exist. It’s not worthless but it’s not an infinite money printing machine either. The entire hope is that AI can become critical to certain sovereign functions / corporate processes thereby speed running to “too big to fail”. The bag can then be handed to the governments & tax payers allowing the entrepreneurs to once again take risks
I would say that there has never been a single moment in history where a technology with as much potential impact as AI hasn't been priced in waaaay ahead of time. It's just inevitable to any technological advancement at this level; it WILL turn into a bubble at some point, and I agree that the taxpayer will be the holder of many empty bags.
I mostly just had an issue with OP burying his head in the sand and going "Lalalala". He claims AI is as much of a fad as those early dot com websites like pets(dot)com, which should be obviously incorrect to anyone with a quarter of a brain.
At the end of the day dot com wasn’t a fad. But it did destroy enormous amounts of value. I’m just a cranky old man who hates how lying and grifting has become a normal part of tech financing. In the name of innovation we are throwing out well established rules and exposing investors & tax payers to fraud.
Example: AlphaFold
Any country that deliberately chooses to prioritize inferior AI is behind.
A lot. Be more specific
Might not have expressed this clearly. What I mean is smaller teams will host on neoclouds. Larger customers can stand up their own servers + host models on their model.
Agree on OAI haha, super bullish on them
So the next trade is just the current bottleneck trade. I don't know why you think people will care about hyperscalers when they clearly don't give a damn about how cheap they are based on the cash from ops they're generating.
Wow, this is a really thought-provoking take! Honestly, I hadn’t considered intelligence sovereignty as the next big bottleneck, but it makes a lot of sense. The idea that governments or vendors could start restricting access to frontier models—especially in sensitive sectors—totally shifts the game.
It’s like we’re heading into an era where local, self-hosted AI isn’t just a luxury but a necessity for security and strategic independence. Open-source models gaining importance? Yeah, that could really shake things up, even if they lag behind closed models. It’s also interesting how this might level the playing field—countries without the same AI access could end up investing more in compute and talent just to keep pace. Definitely a lot to think about for investors and companies alike. Thanks for sharing this perspective—super insightful!
Chat bot and easier search.
Those are gains
Absolutely monster beat by Micron 🔥