AI Industry Booms, But Who's Really Making Money?

The AI industry can be thought of as a three-storey building, according to an analysis by Longbridge's AI Industry Analyst. The first floor (1F) is compute, where prices are rising due to increased demand for GPUs and foundry capacity. Nvidia, TSMC, and Broadcom are among the companies benefiting from this trend.

However, despite the growth in compute, these chipmakers aren't earning as much as one might expect. In fact, a chart comparing their latest earnings shows that Nvidia's margins have actually decreased. This raises questions about who has pricing power in the AI industry.

The analyst also looked at the model layer (2F), where companies like OpenAI and Anthropic are driving demand for advanced computing resources. To understand who benefits from this growth, the analyst followed the money downstream to cloud providers like Microsoft and Amazon. These companies see a significant increase in revenue as a result of AI adoption.

The third floor (3F) represents applications, where new models like GPT-6 Astra are being deployed. While some software stocks, such as Salesforce and ServiceNow, have fallen due to increased competition from AI-powered alternatives, not all application-layer companies are struggling. The analyst notes that the AI application layer is 'sharply divided', with some companies actually making money from AI while others just appear to be slapping an AI label on their products.