Baker Predicts Only Three Survivors in the AI Market

Gavin Baker, chief investment officer of Atreides Management, believes the 'Magnificent 7', a group of companies at the forefront of AI innovation, will dominate the financial landscape in the future. However, he also predicts that one or two of these companies will go extinct.

Baker compares the Mag 7 to world record holders in different events who have now been combined into the same competition, the AI race. He notes that 'you win or you die' in this game, and only a few companies will emerge victorious.

The aggregate market cap of the Mag 7 is currently around $10-12 trillion, but Baker expects it to grow to $50-100 trillion. However, he warns that there is a massive bubble at the application layer, where companies are competing with each other to develop AI models.

Baker predicts that only three companies will survive at the application layer: Google, Meta, and xAI. He argues that these companies have unique data that sets them apart from their competitors, and that they will continue to compound their IQ at a similar rate as scaling laws continue.