Nancy Pelosi's Pick, Palo Alto Networks Downplays AI Spending Need: Analyst Warns 'AI Digestion Phase May Be A Larger Problem'
Benzinga (Tue, 01-Apr 3:05 AM)
After Palo Alto Networks Inc.’s (NASDAQ:PANW) management expressed its opinions about being open to using more affordable, open-source artificial intelligence models, this analyst has warned that the demand for AI hardware could be a larger problem going ahead.
What Happened: Palo Alto’s CEO, Nikesh Arora, hinted at adopting a pragmatic approach to AI spending, prioritizing cost-effectiveness and utilizing resources efficiently.
According to Dan Niles, the founder and portfolio manager of Niles Investment Management, over the weekend, Arora told the Information that "For the tasks where we're getting efficiencies and driving lower costs, I don't think the model's IQ needs to be much higher than it already is…and I don't want to pay a dollar for that. I'd rather pay five cents.”
This led Niles to express concerns about future AI-related hardware demand, which implies chipmakers. According to him, if major companies like Palo Alto Networks are reducing their projected AI spending, this could have a large effect on the companies that produce the hardware required to run AI.
“The AI digestion phase may be a larger problem than I am anticipating for hardware demand,” said Niles.
