VanEck is placing a long-term bet on artificial intelligence, arguing that the AI trade is only in its earliest stages of growth and adoption.
In a new CNBC interview, VanEck product manager Nicholas Frasse says the AI boom is a structural cycle that will take years to fully play out.
According to Frasse, AI is in the early innings of a super cycle, with companies building giant data centers, known as the foundational layer. He says that the buildout will move into the application layer, where AI runs in consumer and enterprise apps.
Eventually, Frasse expects AI to “move out to the edge” and into local devices, like smartphones and cars. According to the VanEck analyst, the AI evolution will not happen overnight.
“We really want to have a long-term perspective. Are you going to have specific price pullbacks inside of this AI growth? But we believe this is a super cycle. Right. And that AI, we’re in the very early innings of this.
You still have these major players developing the foundational models, throwing hundreds of thousands of GPUs to make compute even better. The more compute we throw at it, the better the model gets is essentially what’s still happening.
So we haven’t even seen that come to fruition or a law of diminishing returns when it comes to that. So we have to look at it and say, first you have this foundational layer where they’re still continuing to build out data centers, but then you take that one step further and you look at the application layer. And how much compute is going to be needed as we start to push that application layer out, you start to move out to the edge.”
Taking a long-term view on the AI super cycle, Frasse says investors should keep an eye out for fabless semiconductors that specialize in power-efficient processors that can deliver AI capabilities in constrained environments like phones or embedded systems.
“You can’t put a GPU in a smartphone… So you need Qualcomm. You need all of these different fabless designers that are going to help the silicon move closer and closer to the end user, so that AI becomes even more prolific in everyone’s lives. And we believe that’s essentially what’s going to happen.”
Other fabless chipmakers are ARM and MediaTek.
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