Generative Quarterly with Semil Shah: AI Expectations vs Reality, Tech Trends, and 2025 Predictions

Podcast: Generative Now | AI Builders on Creating the Future
Host: Michael Mignano, Lightspeed Venture Partners
Guest: Semil Shah, Investor (Haystack)
Date: December 26, 2024

Episode Overview

In this special year-end “Generative Quarterly” episode, host Michael Mignano sits down with investor Semil Shah for a candid, far-ranging discussion on the AI landscape in 2024. They dive into whether AI lived up to sky-high expectations this year, unpack dynamics in venture funding and company valuations, and debate technology, business, and even cultural trends. Hot topics include: the reality check after 2023’s AI “breakout,” the struggle of AI hardware startups, Jensen Huang’s transformation into a tech rockstar, and how politics is shaping the future of tech investment and liquidity. The episode wraps with predictions for 2025, plus a lively side conversation on the business of baseball.

Main Discussion Points and Insights

1. AI Expectations in 2024: Hype vs. Reality

• Setting the Scene: Coming off the incredible “breakout” of AI in 2023, 2024 brought with it widespread optimism, but also a sense that momentum might have stalled.
  • Michael (Host): “A lot of people, when you really dig in, feel like it was a little bit of a letdown... 2023 was the breakout year. Right. And then 2024 was a little bit of reality setting in.” (01:09)
• Semil’s Perspective: The feeling of a “letdown” is contextual. Technical advances and investment continued strongly—perhaps expectations were simply too high.
  • Semil: “It seemed like there was a lot of technical advancements and a lot of really smart people building in and around AI... If it's a letdown, it may be that, like, some of that could be pricing related or just momentum related, but those things kind of wax and wane.” (01:31)
• Rate of Change: 2023 set an unrealistic bar; expecting nonstop, exponential breakthroughs year after year is impractical.
  • Michael: “Maybe it was unrealistic to assume that that rate [from 2023] would continue in 24.” (03:58)

2. AI’s Impact: Bigger Than the iPhone, or the Internet?

• The “Horizontal Shift”: Both guests compare the rise of AI to previous technological sea changes.
  • Semil: “People would compare it to iPhone moment... This is bigger. I'm more of like the Peter Thiel sort of… feels more like the advent of the Internet and potentially bigger in terms of value capture.” (04:19)
• Democratization vs. Consolidation: Will AI’s value be broadly shared, or captured by a small, resource-rich elite?
  • Semil: “The value captured here may go to like fewer people and so could be more disruptive economically that way.” (06:22)
  • Michael: “Don't you think, like we could also get to a place where this stuff is just as accessible as the Internet is?” (08:08)
  • Semil: “This is like the open source argument… there’s good arguments for having open source capabilities, there's good arguments for having closed source networks for security... Maybe it's both.” (08:20)

3. Funding and Valuations: Pricing, Mega Rounds, and Private Company Dynamics

• VC Mania and Mega-Rounds: 2024 saw record-breaking funding rounds (e.g., OpenAI $150-160bn valuation).
  • Michael: “These are just crazy numbers, right? These are big, big numbers. To your point, of, of maybe at any price.” (10:36)
  • Semil: “You combine VC excitement and the huge funds with the scale and opportunity and intoxication of what the OpenAI's and XXAIs of the world can do. And you get a lot of intoxicated behavior.” (10:49)
• Staying Private Longer: There’s a potential shift: top companies (e.g., SpaceX, OpenAI) may never IPO, enabled by new mechanisms for liquidity.
  • Semil: “Every quarter it feels more and more likely that like, oh, hey, SpaceX may stay private forever and like OpenAI may like stay private forever.” (11:14)
  • Semil: “Potentially for long term, large institutional investors, private markets offer more stability and actually public markets are riskier.” (12:01)

4. AI Hardware and Consumer Devices: 2024’s Flops and Future Bets

• Failed Launches: Highly anticipated consumer AI devices—by startups like Humane and Rabbit—failed to gain traction.
  • Michael: “There were a lot of startups this year that tried to bring AI to physical devices... and they all just kind of flopped.” (18:16)
  • Semil: “In the consumer AI device lane, you're adding a lot of risk factors already... the benefit has to 10x outweigh all the work and overhead you have to do.” (18:49)
• Incumbent Advantage: Incumbents like Apple (Watch, AirPods) may fare better; future is likely “voice-forward,” lightweight interactions.
  • Michael: “I think the Apple Watch seems like a very, very important opportunity for Apple.” (20:35)
  • Semil: “And the AirPods, absolutely.” (20:54)
• Horizontal “Glue”: OpenAI could become the “horizontal glue” integrating personal AI across all devices.
  • Michael: “If OpenAI can become indispensable to the consumer, they will be in a really strong position to integrate with all of these players and be that horizontal glue that kind of connects all the devices. Agnostic of who made them.” (24:18)

5. Home Automation and Platform Fragmentation

• Platform Fatigue: Attempts to unify smart home devices remain frustrating and fragmented.
  • Michael: “It's pain in the ass, I think, to your point. And it's brittle.” (28:05)
  • Semil: “Brittle, yes. It's like doing an oauth connection to, like, LinkedIn. Right. It's worse than that.” (28:12)
• The Ubiquity Play: OpenAI (or possibly Google) has an opportunity to solve this by being present on all devices, similar to how Spotify gained leverage through ubiquity.

6. Jensen Huang: Tech CEO as Rock Star

• Cultural Phenomenon: Nvidia’s CEO, Jensen Huang, has become a celebrity— a rarity for tech leaders.
  • Michael: “Possibly. We've never seen a tech CEO be a rock star before. This is a guy who's literally signing autographs like on women's physical bodies.” (28:53)
• Sustained Humility: Despite fame, Huang comes across as consistent and authentic.
  • Semil: “His interviews are so consistent and authentic... I think he leans into the fun of it, but doesn't get... enwrapped in the fame part... his humility doesn't get overtaken.” (30:10)
• Bubble Risk?: Is this a sign of frothy, bubble-like behavior?
  • Michael: “How much is this the sign of some sort of, you know, bubble or, you know, stock price sort of inflated kind of mania?” (31:30)
  • Semil: “I don't think of it as so much a bubble. I think even more as the risks are greater given the size of the mountain... There’s the China anti monopoly sort of anti trading risk... The data center wars, right? Government risk.” (32:10)

7. Tech and DC: The “Takeover” and Policy Shifts

• 2024 Election and Tech: With political shifts (Trump back in power), tech’s profile in DC surged, as did appointments from venture/tech circles.
  • Michael: “Was this a surprise to you, this sort of tech takeover of DC and what do you think we, we have to look forward to?” (35:27)
  • Semil: “I don't think it was like a tech take over. I just think of it as like a reorientation around how the government... enabling, supporting, accelerating technologies both for the domestic economy and... internationally as a competitive advantage and security posture.” (36:11)
• Geopolitics and Tech Investment: Expectation that “proliferation of technologies” will continue to be favored—impacts IPOs, M&A, startup funding.

8. Liquidity: IPO, M&A, and the New Venture Landscape

• Tepid IPO Outlook: Industry consensus is that 2025 won’t bring a flood of IPOs, despite optimism.
  • Semil: “...they're not expecting 2025 to be like a watershed moment for IPOs... I think that they view it as a trickle for next year and it will take a while.” (39:01)
• M&A Optimism (With Caveats): If the new regime is friendlier to tech M&A, a flurry could ensue—but only if there are enough high-quality targets and proof of regulatory lightening.
  • Michael: “I'm a little more optimistic... if that regime is more friendly to M&A, my guess is... once that proof has been established, then I would expect the floodgates to open.” (41:27)

9. Resurgence of the “Emerging GP” in Venture Capital

• Smaller Funds Trending: LPs are shifting away from mega-funds toward smaller funds from new or spun-out managers.
  • Semil: “All of capital is moving down the stack. All VCs want to invest earlier, all LPs want to invest in smaller funds. It's all following the same pattern... They've supported these franchises... now their ticket size got bigger and bigger... now they're rebalancing.” (43:53)
  • Semil: “I've always felt like the best governor on VC behavior is fund size.” (45:50)

10. Podcasting Boom: New Formats, Old Media and the YouTube Juggernaut

• Podcast Renaissance: 2024 was an inflection point—distribution, discovery and new show formats exploded, powered by YouTube’s algorithm.
  • Michael: “It feels like there's a renewed popularity of podcasts.” (49:02)
  • Semil: “The straw that's stirring this drink is YouTube... YouTube creates is like the container where everything goes and then everything is kind of clipped and parceled out from there into different networks and brings people in.” (51:15)
• Format Innovations: Tech podcasts (such as Technology Brothers) are leveraging tweet reactions, and platforms are fueling a more dynamic, “clip-driven” media landscape.
  • Michael: “All of the clips are built around reactions to tweets. So all it is is tweet reactions, which is genius because it's just like a never ending supply of content inspiration.” (54:30)

Notable Quotes & Memorable Moments

“It seemed like there was a lot of technical advancements... It's sort of up and down the stack... large companies making huge capex investments... It's just taken over the entire conversation.”

— Semil Shah (01:31)

“I think people's expectations might just be a little bit out of place.”

— Semil Shah (03:27)

“Maybe it was unrealistic to assume that that rate would continue in 24.”

— Michael Mignano (03:58)

“People have conflated the inevitability and the intoxication of the possibility of what this horizontal AI shift can bring with like at any price.”

— Semil Shah (08:20)

“You get a lot of intoxicated behavior, but it may lead to good times, you know, you don't know.”

— Semil Shah (10:49)

“[Jensen Huang] is literally signing autographs like on women's physical bodies. Like, I mean, I've never seen a tech CEO be a celebrity or a rock star like this guy.”

— Michael Mignano (28:53)

“I think of Jensen... as someone who's like trying to make sure the mailroom guys and the secretaries and the people that work the grounds in Nvidia go home with eight figures... given his roots.”

— Semil Shah (32:42)

“If OpenAI can become indispensable to the consumer... be that horizontal glue that kind of connects all the devices.”

— Michael Mignano (24:18)

“The straw that's stirring this drink is YouTube... if YouTube wasn't in this juggernaut position, I don't know if we'd be saying all this right, because YouTube creates is like the container where everything goes.”

— Semil Shah (51:15)

“There's always these gaps in venture... usually the gap lasts about two years, but people always fill the gap. So right now that gap is open. People are filling that gap.”

— Semil Shah (47:36)

Timestamps for Important Segments

• AI Expectations and Hype/Reality: 01:09 – 05:04
• AI Value, Horizontal Impact, Democratization: 05:12 – 09:41
• Funding Frenzy, Mega-Rounds, Private Company Dynamics: 09:41 – 14:24
• IPO, M&A, New Structures in VC: 14:28 – 17:49; 39:01 – 41:27
• AI Device Flops and Hardware Risks: 18:16 – 22:24
• Platform Fragmentation and the “Horizontal Glue”: 23:32 – 26:55
• Jensen Huang, Celebrity CEO Culture: 28:53 – 34:50
• Politics and Tech Trajectory in Washington: 35:27 – 38:41
• Resurgence of Emerging GP, LP Strategy Shifts: 43:42 – 48:42
• Podcast Boom, New Formats, YouTube’s Power: 49:02 – 56:49

Concluding Vibe

Candid, occasionally irreverent, and always high-level, this year-end discussion offers deep insight into how AI is (and isn’t) living up to the hype—touching on technology, funding, business models, culture, and even sports. Whether you’re tracking AI’s next iPhone moment, pondering the future of venture capital, or just want to understand why Jensen Huang is the “rockstar in the leather jacket,” this is an episode packed with context, expert perspective, and lively real talk.