SaaSletter - AI Math + July 2024 B2B AI + Employment Indices
SaaSletter - AI Math + July 2024 B2B AI + Employment Indices
Plus more from Sapphire Ventures, Tidemark, and Scott Brinker
July 2024 B2B AI Interest Index from Cloud Ratings
We’ve updated our B2B AI Interest Index through July 2024 - full slides below:
July represents the second straight month with broadly negative trends.
Notably, the thematic Category Interest (i.e. “manufacturing AI” or “security AI”) level again showed a decline after consistent increases:
Bellwether Microsoft Copilot saw another decline, with other “Blue Chips” also falling:
A very small decrease for SaaS Incumbents (n=340, same 340 vendors tracked in our top-of-the-funnel focused, forward-looking SaaS Demand Index):
Interest in AI Native apps (n=50) increased, reversing recent declines:
AI Bubble Math - Key Data From Sapphire Ventures
Saphhire Ventures’ “July 2024 Market Memo” (h/t Jake Dellapasqua for flagging) included an aggregation of GenAI revenues at roughly ~$15.3 billion when making assumptions for Amazon and Google.
The Sapphire revenue figure is an important numerator to compare against the AI CapEx denominator in the ongoing “AI Bubble Math” debate - see the math from Sequoia and Barclays here:
Working from Nvidia financials, David Cahn from Sequoia calculates a needed AI revenue amount of $600 billion, meaning the $15 billion of AI revenue (via Sapphire) is woefully short today:
While the AI Bubble Math debate is well outside my zone of competence, I will flag other variables:
GPU Allocations: Only a certain proportion of GPUs are allocated to the cloud service providers to “rent out.” Said differently, Meta’s spending on GPUs should have no impact on AI revenue required from AI Natives like Harvey and Glean. This chart from Morgan Stanley’s *October 2023* “What Can We Learn from the GPU Math?” shows hyperscalers representing 38% of 2025e GPU supply, potentially lowering required revenue to $228 billion. Of course, the $15 billion of revenue remains incredibly distant.
Internal Usage: Looking at both recent earnings (see Buck’s interpretation of Microsoft CapEx) and just contemplating the sheer resource needs for AI internally, whether known (Microsoft Copilot, Google Gemini, ad + shopper conversion optimizations for Amazon.com retail operations, etc) or unknown (next generation of AI products/initiatives), signs of high internal usage might justify overlooking “AI-native revenue required” in the short term (i.e. internal use fills any gap) when gauging a bubble.
Curated Content
From 2 past podcast guests:
Scott Brinker - episode here - looked at a hypothetical MarTech aggregator.
Dave Yuan - episode here - and Tidemark updated their viewpoint on AI: “AI Evolution: An Update”
July 2024 SaaS Employment Index
We’ve updated our SaaS Employment Index (which tracks 3,500+ US-headquartered private software companies) through July:
Our 12-month lookback snapshot looks grim at first glance, particularly for 200+ employees and Series C to private equity:
… but our higher sensitivity 6-month look back captures some hiring momentum starting in May for 200+ FTEs.
With a more mixed 6-month look back when segmented by funding stages, especially Series B+ (less growth stage deals = less hiring?):
Deeper drill-downs for the Marketing and Sales functions are available in the SaaS Employment Index slides.
About Cloud Ratings
For our many new readers, we recently announced a research partnership with G2 - more here:
with this slide showing how our G2-enhanced Quadrants (like our recent Sales Engagement Software) release, this business of software newsletter you are reading, our podcasts, and our True ROI practice area all fit within our modern analyst firm:
