If you had been fortunate in 2022, you would have invested in more BigTech in the S&P 500, in particular with Apple, Google, Microsoft, Nividea – stocks that have risen 75% in 2023.
We have already seen the Nasdaq composite jump by over 35% due to the big blitz of generative AI, which makes me wonder if are in a bubble, or will we see new AI companies dominate and start to disintermediate some of the players we have always bet on?
What is clear is that AI needs lots of processing power which means chipmakers are critical. Already Nvidia (NVDA) shares have increased by 209% in 2023, and trades at more than 220 times its trailed earnings.
Large language models (LLMs) that are the foundations of generative AI building blocks that provide the building blocks to develop applications. that mimic the ways a human writes and speaks. We must always remember LLM’s need large volumes of data to train on so companies like META have recently made its Llama (LLM) an opensource access. How long this will persist remains to be seen?
Other big bets are Qualcomm (QCOM)which is building its Snapdragon chip technology to process AI tasks directly on smartphones, without the aid of cloud-computing resources accessed via internet connections and is working on Meta. This is a very novel approach and gives us a vision of what will continue to be new approaches to cloud connections.
If you take a closer look at Microsoft’s brilliant investment in OpenAI and its very new Azure OpenAI Service – it already has over 10,000 customers, up from 2,500-plus in April of this year.
Venture capitalist Marc Andreessen once observed how “software is eating the world” by remaking industries through automation. In the same way, artificial intelligence is transforming the software industry.
We are also seeing high valuation activity in the venture market with healthy investments like Inflection AI which recently raised $1.3 billion in a round led by Microsoft and Nvidia. The funding round values Inflection AI at $4 billion. The company’s LLM Pi is a virtual assistant.
Anthropic announced in late May 2023, that it had successfully raised $450 million in a funding round led by Spark Capital. Google, Salesforce (CRM), Sound Ventures and Zoom Video Communications (ZM) – all participated.
Andreessen Horowitz led a $150 million funding round for Character.AI, which now has a valuation of over $1 billion.
We are definitely in the AI Goldrush era, but will the frenzy persist?
Many economists like: Charles MacKay (“Some Extraordinary Delusions and the Madness of Crowds”), John Kenneth Galbraith (“The Great Crash, 1929″), Edward Chancellor (“Devil Take the Hindmost”) and Charles Kindleberger (“Manias, Panics and Crashes”) have written outstanding warning of the recurring tendency for investors to go crazy for stocks and not heed fundamentals.
I do think we are in the early stages of an AI bubble, so ensuring your portfolio’s remain balanced is simply wise investing. Perhaps Campbell Soup is an alternative stock that has a solid influence to offset the tech AI boom, heavily fuelled now by generative AI.
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