Season 7, Post 35: Postcard from San Francisco

Your author spent last week in the California Bay Area. The purpose of the trip: to meet businesses and gauge where we are in the hype cycle. Meetings with 16 companies between San Francisco and San Jose provided ample opportunity. Below follow our four key highlights, in a slightly longer than usual Blog post.

AI:

Rest assured, we are still “early in the AI frenzy” according to one business whom we met. Sure, almost every conversation (with corporates and overheard in bars and restaurants) featured the term, but the explanation for why we may be early is simple, because – as another executive put it – AI is “very misunderstood.” Bullishness towards AI seemed somewhat more nuanced relative to prior trips to the US.

Several businesses highlighted to us how everything – from LLMs to agents via GPUs and cloud servers – was being labelled as AI (as much as anything to appease investors). Yet in practical terms, we were told that implementation is “a multi-year journey for any business.” Corporate “vision and reality” were also not always fully aligned, another informed us.

At the more optimistic end of the spectrum, one financial services business highlighted how “loads of savings” would come from AI and how every member of its organisation was already being monitored and assessed on their daily AI usage.

Power:

Although not as headline-grabbing as AI, we were reminded on several occasions that any gains from the technology would be defined by power availability. This was characterised by one business whom we met as being “the number one bottleneck.” The list of places (businesses, data centres) facing power shortages “grows every day”, we were told. With power demand being “huge”, many are apparently turning to solar – for it is both cost-efficient and quick to deploy.

Autonomous Vehicles:

Your author quickly got used to the sight of driverless Waymo vehicles navigating the hilly streets of San Francisco. Taking one is both easy and enjoyable. Subsequent rides in both rainy and dark conditions did not prove problematic for the vehicles either. While we were in the States, Waymo rival Zoox (owned by Amazon) formally launched its autonomous services in Las Vegas.

Excitement is growing but we were reminded that the industry is still at a very early stage, where the real winners may not yet have emerged (think of where AOL is today versus its positioning at the peak of the dotcom boom). Further, we should not read too much into early success stories such as Waymo in San Francisco. Autonomous vehicles (AVs) work well in small operating zones. Given they remain expensive, it is not efficient to have too many idle vehicles, especially when demand between peak and trough times can vary by a factor of ten in major cities. Deploying AVs in chaotic areas such as airports, on motorways (where speed creates a much greater risk than in city centres) and in European cities with much narrower streets could yet prove problematic.

AVs may therefore take some time to arrive. The businesses we spoke to highlighted how the industry would likely remain “fragmented.” A technology-agnostic platform approach might end up being the most defensible strategy. In the future, “almost all” vehicles will have some autonomous features, but many may still prefer the presence of a human – for conversation, help unloading suitcases and so on.

Humanoid robots

The robots may finally be coming – albeit slowly. We profiled humanoids earlier this year and they have made impressive appearances at Olympic-like events too. Your author saw some operational when in California (in a trial format only) but similar to other trends discussed above, the key message was one of nuance and expectations management.

One business mentioned to us the “complexity versus expense” trade-off, while another highlighted that “efficiency [trumped] form factor.” Put another way, understanding the environment in which the robots would operate in matters most. Not all warehouse processes require two legs, however visually appealing this may be. Further, since robots require charging stations, they do also take up valuable space that could potentially be used more efficiently for other purposes. Of course, we were reminded it’s “still easy to raise [venture capital] money for science fiction ideas.” This is maybe a fitting epitaph for the current California vibe.

16 September 2025

The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.

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Alex Gunz, Fund Manager