The Next Big Thing
It turns out that the virality of ChatGPT has set off a race. The chart below shows that big tech companies are rushing to emphasize how AI affects their business models all of a sudden.
To be clear, this is not limited to chatbot AI. Already, AI "artists" were making a lot of noise and causing a lot of philosophical and practical debate about copyright issues. Additionally, and perhaps more importantly, artificial intelligence (AI) has already been utilized in medical research to resolve extremely challenging issues, with protein folding being the most well-known example, in my opinion.
All of it is very fascinating, but how do you invest in it?
This is always where things get more complicated. The most significant issues when investing in "hot new areas" are as follows:
- as more money is poured into the industry, everything quickly becomes expensive;
- It is impossible to predict what will and won't work out;
- It's also possible that the best investment for the future hasn't even been thought of yet;
- Publicly listed investments typically do not include pure plays.
Additionally, AI is an all-purpose technology. It is already having an effect on everything, including drug discovery, journalism (I'm not worried, honest), the law, and, of course, everything tech-related.
Providers of exchange-traded funds (ETFs) have taken no time at all to try to bring relevant products to market when it comes to additional areas of investigation. There are currently a number of AI-related exchange-traded funds (ETFs) on the market; however, one ETF provider has filed paperwork to launch a "Conversational AI" fund. These might be good places to start if you want to do more research.
The impact on the biggest tech players is another obvious place to start. The excellent Stratechery newsletter's author, Ben Thompson, published an article last month that is well worth reading. He examines the effects on Alphabet Inc. (Google's parent company) and Meta Platforms Inc., as well as Apple Inc., Amazon.com Inc., Microsoft Corp., and Meta Platforms Inc.
To summarize one of his points, he says that Google might be most at risk because—and this is a huge oversimplification—Google currently makes most of its money by being the best Yellow Pages in the world, and a search engine that looks like ChatGPT is the biggest threat to Google's moat that has yet emerged.
ChatGPT is currently being incorporated into a redesign that Microsoft is working on for its own search engine, Bing. Google will respond with its own AI, dubbed "Bard," which has a name that is a bit more evocative.
As someone who will always choose a Chrome product over a Microsoft one, Alphabet/Google may discover a way to win this battle. But you can see how big a change this could be.
Thompson adds that it's possible that Nvidia Corporation and Taiwan Semiconductor Manufacturing Co., which manufacture the chips on which all of this stuff runs, will end up being the biggest winners. So they might be good for "pick and shovel" games, but keep in mind that this is a notoriously cyclical industry.
Anyway. Don't forget about valuations and, most importantly, don't let Fear of Missing Out (FOMO) cloud your thinking if this is an area you want to investigate.
Keep in mind that the internet's industry-upheaval phase occurred long after the dotcom bubble burst. For instance, many traditional retailers were still sneering at the idea that ecommerce could ever catch on by the end of 2009, when Amazon finally recovered its share price peak from 1999.
Be patient, then. Although "this may be the beginning of the AI epoch, but even in tech, epochs take a decade or longer to transform everything around them." it is easy to panic when you see a hot new thing.
Comments
Post a Comment