Get Ahead in the AI Revolution: Heed the Wisdom of Don Valentine, Silicon Valley Legend
Artificial Intelligence market explosion
Technology and trade conflicts are reshaping our world, impacting businesses and militaries alike. But how to navigate these changes? How to profit or, at the very least, avoid getting left behind. Let's focus on tech, particularly AI.
One of my personal heroes—an unforgettable interview from my journalistic days—is the late great Don Valentine, founder of Sequoia Capital. Known as one of the top Silicon Valley venture capitalists, Don was all about being directionally right. A winning venture fund had one or two 10x to 100x hits combined with a handful of 5x successes to keep the partners happy. He'd pause here for dramatic effect, saying you'll get no wins at all if you choose your bets poorly.
Valentine's advice to fellow investors: Skip the analytics and fancy case studies. Focus first and foremost on choosing the right quadrant of investment possibilities.
Valentine pinpointed two factors that lead you to the right investment quadrant, both of which were observable and measurable, making you a real lazy investor if you didn't spot them. The first, the speed of the underlying technology. From 1965 to 2015, Moore's Law set the pace for investments, offering a predictable future based on transistor density improvements. With an insatiable appetite for Moore's Law, Valentine almost lived by it.
But around 2015, Moore's Law started to lose its luster. Nvidia's graphic processors used in conjunction with cutting-edge deep learning algorithms from Google and others have given new life to AI, an investment wasteland since the 1980s. Today, AI is AI's reign, the new game changer, moving faster—at least twice as fast—as Moore's Law.
Think about it this way: Investment-wise, Moore's Law equals a 30%-40% compound annual rate of return. Any takers? But today's AI offers a 75%-100% CAGR. How long will this AI torrent last? Maybe a decade or two, or like Moore's Law, perhaps even a half-century.
The second indicator of finding the right investment quadrant, according to Valentine, is early customer enthusiasm. In the right quadrant, customers don't need persuading. They hear about the product through word-of-mouth, they see it, play with it, buy it. High sales costs and lengthy negotiations vanish, as do prohibitive marketing costs, replaced by satisfied customers eager to promote the product.
Where is AI booming? Look for locations with booming data center capacity. Similar signs: Expansion of the world's largest data center operators. If worldwide data center growth averages about 15% per year, according to JLL Research, which nations and regions are seeing the highest demand? In which countries is the digital elite—Microsoft, Amazon, Oracle, Google—spending billions?
Clue for venturesome investors: The CEOs of those tech titans have all visited ASEAN countries in the past year. Data center growth in ASEAN is projected to keep pace with double-digit global growth.
Prediction: The big winners in the AI era won't just be AI companies but businesses shrewdly and swiftly adopting AI. This new breed will dominate across industries—agriculture, manufacturing, shipping, transportation—located on the cutting edge of modern businesses. Slow-moving companies will struggle. The wealthiest of the slow-moving giants will attempt to compensate with acquisitions, but they will fall to the champions of AI adoption.
ForbesAI Wealth DisruptionForbesProven Growth FormulaForbesBits And AtomsForbesNavigating America's PopulismForbesSmarts In The Age Of AIForbesElectricity WarsForbesVinod Khosla On AI's Fast Rise, Robotics, Entrepreneurs And InnovationForbesWho Learns Fastest, WinsForbesMoonshots Vs. Marginal GainsForbesGreat Plains Presidential Dark Horse - Doug BurgumForbesThe Great AI Deflation Bomb
Enrichment Data:
The evolution of Don Valentine's AI investment advice has shifted towards a strategy that focuses on backing companies that own essential AI layers—platforms and ecosystems that integrate AI strategically to solve real-world problems. Instead of chasing hardware advancements limited by physics, his focus now lies on software and service layers that enable practical use and adoption of AI across multiple sectors. Today, AI flourishes especially in financial services asset management platforms, companies transforming physical business operations, and problem-focused AI applications, rather than in raw silicon development.
- In the rapidly changing market influenced by technology and tariffs, focusing on AI investment could be key to success, as suggested by Don Valentine, a Silicon Valley legend.
- To find the right AI investment quadrant, as Valentine proposed, one should look for early customer enthusiasm in emerging data center hubs, such as ASEAN countries that have caught the attention of tech titans like Microsoft, Amazon, Oracle, and Google.
- The AI transformation is not limited to AI-specific companies but will predominantly affect businesses that swiftly adopt AI, enabling them to dominate various industries like agriculture, manufacturing, shipping, and transportation. Sluggish companies may struggle, and even giants aiming to compensate with acquisitions might suffer at the hands of the new AI-adopting champions.
