Mr. Hirsch, enormous amounts of capital are already flowing into artificial intelligence. Are we still at the beginning of the investment cycle, or have we already passed the tipping point?

We are still very early in the journey. We are quite far along in terms of investment in data infrastructure and beginning to get midway through the energy buildout that will be required.

But what we have not yet seen are all the technologies and applications that are going to spin off from this. Today, everything is largely driven by a handful of large language models. AI has not yet become pervasive in every part of our lives.

So you really believe we are only at the beginning of this transformation?

At the very beginning. Look at the percentage of people who are actually paying to use AI today. It is incredibly small.

“AI Is the Newest Arms Race.”

At the same time, some of these companies are experiencing extraordinary revenue growth. But their current revenues come nowhere close to justifying some of the valuations they are seeking at IPO or that investors expect them to grow into over time.

How this journey plays out, and how quickly, remains a major question.

Does AI need more regulation?

I think it does, but we need to be very careful about what problem we are trying to solve.

There is no question that AI is the newest arms race, if you will. For the US, it is an arms race with China. Doing things that dramatically constrain the growth of the AI industry would therefore be problematic.

At the same time, allowing the industry to run unchecked, given the potential damage that could result, is problematic as well.

The challenge is to find the right level of regulation to keep us safe without constraining innovation and entrepreneurship. That is going to be a very difficult needle to thread. 

Employees are increasingly worried that AI will eliminate their jobs. Do you share that concern?

So far, we are not seeing much data indicating a massive wholesale elimination of jobs from AI.

What we are seeing is AI making employees more efficient, and that is likely to slow hiring. But slowing the rate of hiring is very different from laying off massive numbers of people.

“Europe Right Now Is Not On That Playing Field.”

In the nearer term, autonomous vehicles could actually have a much greater impact on certain jobs – Uber and taxi drivers or truck drivers, for example – than what we are currently seeing from pure AI job replacement.

Europe has produced relatively few major AI companies compared with the US and China. How do you assess Europe's position?

Europe is going to have to choose a path. Does it align itself more closely with Chinese technology, with the pros and cons that come with that, or with US businesses?

The idea that a brand-new European LLM is suddenly going to emerge from nowhere and become a major global player seems unlikely under the current circumstances.

Technology could, of course, shift away from LLMs into something new. But based on the playing field as it is set today, the major players are essentially established.

Europe right now is not on that playing field. It is going to have to pick a team. 

That creates an uncomfortable dependency.

If I were Europe, given today's geopolitical environment, I would want greater independence.

Europe is already prioritizing greater independence in military and defense capabilities, and you are seeing significant capital beginning to flow into that.

There is also a huge need for greater independence in power and energy production. That will be a major pain point for Europe, but it will also create significant investment opportunities in the infrastructure required to achieve it.

Investors are currently focused on a relatively small number of AI companies. Are those really the most attractive opportunities?

It’s probably more attractive to look at the companies around them.

Think of today's major AI companies as the hub. We are going to see all kinds of spokes being developed off that hub.

The hub remains very valuable, but a lot of the value creation has already occurred there. With the next spoke, you might invest at a $100 million valuation and potentially see that company become worth $5 billion.

So I think there is probably more action ahead around the spokes than around the hub itself.