Why does everyone seem to think that machine intelligence is solely a function of processor speed?
You'd better hope it is. If hardware is what limits the rate of improvement of AI, you get slow growth. If knowledge of how to write the software (perhaps by copying algorithms from the brain) limits it, then you get sudden improvements and serious potential for a runaway singularity.
However, one outside chance of a limit may be that the brain is doing something that is fundamentally different to the kinds of operations carried out by a normal computer - which is essentially the argument in The Emperor's New Mind. When I read that book at the height of my own AI enthusiasm I thought it was pretty silly. However, after reading Anathem (of all things) it made me wonder if perhaps Penrose may have had a point.