Hyperscalers and chip stocks have soared in the first phase of AI. CNBC's Robert Frank joins 'Squawk Box' to discuss where the next big wave of investments will come from.

The release of Open AI's ChatGPT has accelerated the development of artificial intelligence and warnings about its impact on society.

Rise of AI

The next phase of the artificial intelligence boom is expected to center on AI agents that perform specific tasks within enterprise software, according to Robert Smith, CEO of Vista Equity Partners. While the initial surge in AI investment benefited hyperscalers and chip stocks, Smith highlights that the most significant future gains will likely come from private enterprise software companies deploying these agents.

Smith notes that 97% of enterprise software firms are private, meaning investors will need to look beyond public markets for exposure. He also emphasizes that proprietary data and the specialized nature of enterprise AI agents help prevent their commoditization, unlike large language models (LLMs) and hyperscalers. The accuracy demands for these agents, particularly in sectors like insurance and automotive, further distinguish them from consumer-facing AI applications.

Inside the next phase of AI boom

Hyperscalers and chip stocks soaring in the first phase of AI. So where will the next big wave of investments come from? Robert Frank joins us now with the details. Good morning, Andrew. Great to see you. Good morning Happy new year to you now after the hyperscalers and the data centers the next phase of the AI boom will be in AI Agents Robert Smith the CEO of Vista equity partners told me that the application of AI that's where AI agents perform specific tax Taxpayer companies will be the biggest winners Vista, which has over 100 billion dollars and under management and 90 portfolio companies has created an agentic Factory as they call it to roll out agents across its companies AI is a true general-purpose technology it is going to affect every single business and it is either going to be exponential for some or Existential for others and you know, I'm optimistic in the way that we are embracing it Embedding it across all of our companies. This is now an exponential opportunity Smith said that 97% of enterprise software companies are private So investors will have to access them through the private markets now the software stocks like Salesforce and workday Happen under pressure from AI with a lot of predictions that AI will quote eat Software Smith says it's the LLMs and the hyperscalers that will actually become more commoditized while the agents are already Doubling productivity and profits at many companies now for the full interview with Smith including how he uses his own Personal AI agents he names it Q you can sign up for the inside alts newsletter That is out in just a few minutes. You can sign up at CBC comm slash alts that CBC comm slash alts Oh One of the questions about these agents though is whether they all get commoditized in the end That's the thing that I can't figure out Well, what prevents that is that all of the data a lot of the data within enterprise software? Is has not gone out to the LLMs and is not it's basically still contained within the companies and within the enterprise software So that data is still proprietary To those software firms and these companies and that's why you know It's it's likely not going to be commoditized as well as the fact that a lot of these agents are doing very specific Things which makes them useful But also means that it's it's difficult to scale it to the extent that they just become another commodity Whereas the LLMs, you know as we've seen the progress has stalled, but we're all there That wants the model and that maybe then the model the LLMs all become Come on, that's right. That's right. But is it possible that then they're so successful that they can then commoditize the agents if you will Because they can all do the same thing Yes, but that that thing that same thing that they're doing is layered on top of the data though. I'm saying yeah, right But but again as long as the data is proprietary to the to the specific agents and the companies and the enterprise software There's a lot less risk as well as the fact that these enterprise software companies the accuracy rate on these Agents within companies whether you're working in insurance or automotive They have to be so much higher than a consumer facing LLM, which is like find me a Thai restaurant Okay, maybe it's accurate 93% of the time 93% Doesn't cut an insurance or if it's if you're working for an airline or some other company So really interesting that that this next phase which is really under the radar now is Really only in the private markets. It's sort of talking his book because he's a private equity firm But that's where a lot of the next action will be according to him We're away from Six Sigma. No, we're not. Absolutely One mistake in 10 million some brother Something like that you couldn't make no mistake AI is like 500,000 mistakes in 1 million

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Venezuela Strikes

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London

Ukraine Invasion

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Jerusalem

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Soweto

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Inside the next phase of AI boom

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