Generative AI: Game Changer for the Data Center Sector

Artificial intelligence will make its presence felt in new ways in 2023, as machine learning models enter everyday use through new services and augment existing apps - including search and office productivity.

There have been spectacular advances in AI over the past year, especially for generative AI applications that captured the public imagination by using short text queries to create images, answer questions, write essays, compose poetry, and accelerate software programming. These advances may be further accelerated by this week's release of GPT-4, the newest version of OpenAI's groundbreaking AI technology. 

The rise of artificial intelligence has been enabled by hardware and data centers, and increased adoption of AI will require more compute capacity to support all that additional data crunching. Startups and cloud platforms will be the early users, but if tools based on generative AI can create a competitive advantage, enterprise customers will race to harness these tools.

Microsoft has already integrated OpenAI's ChatGPT technology into its Bing search engine. Today it announced Microsoft 365 Copilot, which builds generative AI into business tools tools used by millions of consumers. Google this week unveiled plans for a suite of generative AI tools and integrations in Google Docs and Gmail.

“AI will fundamentally change every software category, starting with the largest category of all – search,” said Satya Nadella, CEO of Microsoft.

"We’re now at a pivotal moment in our AI journey," said Thomas Kurian, CEO of Google Cloud. "Breakthroughs in generative AI are fundamentally changing how people interact with technology."

Those are big claims by the biggest players in technology. It's clear that generative AI apps are a work in progress, and many challenges lie ahead, especially in addressing inaccuracies and intellectual property issues related to their training data. In short: The new world isn't here yet, but the horizon is coming fast, and big changes will arrive sooner rather than later.

Why Generative AI Matters for Business

Since mid-2022, stunning AI apps have emerged that allow computers using machine learning algorithms to generate content, including text, images, audio, video, and code. These include:

• ChatGPT, described as a “mind-blowing AI chatbot” that gained more than 100 million users in just two months. The AI app can answer questions, create essays on complex topics, compose poetry, and write programming code. The debut of ChatGPT created a sensation on social media, leading to predictions that the tool could transform the use of AI to create content.
• Dall-E, an image generator from OpenAI that translates simple text queries into surprisingly detailed images. It was soon followed by similar applications like the open source Stable Diffusion and MidJourney, which generates art based on text prompts in a Discord server.
• Lensa AI, an app from Prisma Labs built atop Stable Diffusion, uses AI to generate artsy “magic avatars” from uploaded selfies, which quickly began showing up on social media profiles. Lensa became the most popular iPhone app but has also prompted controversy about privacy and sexualization.
• GitHub CoPilot , an AI app trained on billions of lines of software code, natural language prompts into coding suggestions across dozens of programming languages.

The Nov. 30 launch of Open AI's ChatGPT triggered excitement with its groundbreaking use of conversational AI to tap a deep knowledge base. 

"After decades of traveling along an exponential curve, AI has reached its own 'new world' moment," said Ashu Garg, general partner at Foundation Capital, who compares the impact of ChatGPT to the launch of the Netscape browser. "Sooner and more radically than we expect, AI will remake every major category of enterprise software."

In its rollout of GPT-4 on Tuesday, OpenAI announced technology partnerships with Stripe (e-commerce), Duolingo (language), Khan Academy (education), and Morgan Stanley (finance). It also featured a fascinating demo with Danish developer BeMyEyes showcasing GPT-4's use of computer vision (a new addition) to assist blind users by identifying and describing objects in their environment.      

Sequoia Capital sees generative AI unleashing "a creative new world." 

"Every industry that requires humans to create original work - from social media to gaming, advertising to architecture, coding to graphic design, product design to law, marketing to sales - is up for reinvention," Sequoia writes. "Just as mobile unleashed new types of applications through new capabilities like - GPS, cameras and on-the-go connectivity, we expect these large models to motivate a new wave of generative AI applications."

Almost no one is saying that the current generation of AI is ready for prime time. But the rate of improvement in these AI apps is accelerating, and models are likely to improve quickly as they leverage more data and computing power, further shrinking the gap between humans and machines.

Gartner predicts that by 2025, 30% of outbound marketing messages from large organizations will be "synthetically generated," up from about 2% in 2022, and says that as generative AI improves it can disrupt the design of pharmaceutical products and semiconductors. Sequoia projects that by 2025, generative AI apps will equal or surpass humans in writing, software programming and creating logos and digital imagery.

Investment Dollars Follow the AI Buzz

That hype has led to a surge of investment in generative AI startups. research firm CB Insights is tracking 250 startups focusing on generative AI, spread across 45 different categories. In 2022, investors pumped at least $1.37 billion into generative AI companies, according to PitchBook.

The investment frenzy will also extend to digital infrastructure, as cloud players build AI-as-a-service platforms and enterprise users race to wield AI for competitive advantage.

“Public perception of next gen technologies matters a lot when justifying infrastructure investment," said Rob Powell of Telecom Ramblings. "The fascination with ChatGPT will only grow and thus bring AI from a perceived future driver to a current one, even as the industry moves to put other forms of AI and ML to work in less high-profile ways".

“The hype about generative AI becomes reality in 2023," said Manuvir Das, Senior Vice President for Enterprise Computing at NVIDIA. "This new creative era will fuel massive advances in personalized customer service, drive new business models and pave the way for breakthroughs in healthcare.”

A Doubled-Edged Sword 

But there are also many warning signs about the fallibility of AI chatbots, and an array of problem scenarios related to its misuse.

"As with every new technology, business leaders must proceed with eyes wide open, because (generative AI) technology today presents many ethical and practical challenges." wrote McKinsey's Michael Chu, Roger Roberts and Lareina Yee in a blog post. "The awe-inspiring results of generative AI might make it seem like a ready-set-go technology, but that’s not the case. Its nascency requires executives to proceed with an abundance of caution ... (and) remain acutely aware of the risks that exist at this early stage of the technology’s development."

Analysts warn that generative AI apps struggle with accuracy, intellectual property, and systemic biases, and must develop filters to address harmful uses of chatbots and their AI kin.

"Generative AI doesn’t just present opportunities for business; the threats are real, too including the potential for deepfakes, copyright issues and other malicious uses of generative AI technology to target your organization," notes Gartner. 

Hot Hardware, and More of It

One area of broad agreement is that growth in AI adoption will translate into stronger demand for powerful hardware - including GPUs and domain-specific hardware optimized for AI computing. 

"AI workloads differ dramatically from traditional cloud applications built around web servers and databases," writes Garg of Foundation Capital. "They thus require special configurations of hardware and software to reach optimal performance. Clouds that are purpose built for AI workloads, with specialized silicon, schedulers, and interconnect, represent another growing market where startups can play."

That's why the rise of generative AI has broad implications for digital infrastructure. Like cloud computing before it, the AI shift can drive changes in IT hardware, where it lives, and what it costs - in both dollars and other mission-critical resources like energy and water. Although this may be a cloud-first phenomenon, it won't be cloud-only, as noted by veteran analyst and columnist David Linthicum.

"Public cloud providers are the driving force behind the current AI resurgence," Linthicum writes. "Even though AI technology is now better optimized (and let’s just admit that it’s fun to play with), you need to fully understand the business value that it can return and acknowledge when the ROI is not there. ... Many AI/ML systems are much more expensive to maintain. Specialized skills are needed to build and deploy these systems and then to operate them., AI has its place. We need to be more attentive to the ROI of its usage."

In coming weeks, Data Center Frontier will look at the many facets of how generative AI may impact leading business segments and players in the data center sector. To get updates on our coverage, you can sign up for the DCF newsletter or follow us on LinkedIn, Twitter and Facebook.