Since Chat GPT launched in November 2022, Nvidia’s stock is up 500%. As global stock markets gyrate and bears and bulls argue where we are in the AI Hype Cycle, its relation to the Yen Carry Trade, and whether Sam Altman is just this year’s Elizabeth Holmes, it’s worth remembering that the current financial frenzy around AI has little to do with AI’s long term trajectory nor its ultimate impact on the world.
Nvidia and other AI adjacent stocks have exploded for two reasons; firstly, because AI is the great story of our time, but secondly because in a globalized financial world with few limits on the movement of information or capital between countries (which was the case up until relatively recently) all of the alpha chasing money in the world has flowed into AI stocks. Nvidia is an incredible story but has benefited enormously from a simple imbalance between demand and supply for its stock. This is true still even post its recent 10-1 split.
Assuming that we are at, close to, or just over the peak of inflated expectations (no technology nor new idea has ever not gone through the cycle), the next couple of years are bound to see AI skeptics (led by New York University professor Gary Marcus) become more confident in their view that AI is all hype and no cattle.
Those, like Marcus, who live in (the) Slough (of Despondency) will have their time in the sun but will ultimately be on the wrong of history. AI IS the great story of our time, of that there is no doubt. What other dynamic abroad in the world currently has the potentiality to change everything? Climate change? Migration? War? All huge dynamics but none will as completely rewrite how we work and live as fundamentally as AI will over the course of the next 30 years.
There is not room here to catalogue the extraordinary examples that emerge everyday of AI’s developing capabilities. If you’re not already following the Wharton School’s Ethan Mollick I highly recommend you do. Just this week he has highlighted an article by Nicholas Carlini of Google DeepMind that states that he codes 50% faster using an LLM. That is not a bicycle for the mind but a Kawasaki Ninja H2R.
A major part of Marcus’s critique of AI (around which financial bears circle) is of the failure of the AI industry to have created AGI by now. AGI is though an arbitrary and false goal, the search for which may be as elongated and illusory as the medieval hunt for alchemy.
AGI (whatever that really means) is not all you need and on the journey towards it, whether that takes one year or a hundred, nothing will be untouched.
Was it great that my 401k benefited from Nvidia being at $131.38 on July 9th? Yes Sir! Does it suck that Nvidia’s only at $105.79 as I type? It sure does. Will any of that be remembered in the years to come as AI reshapes the world? Unlikely. Mixing the important and the unimportant and coming to the wrong conclusion is how retirement funds, companies, and countries go wrong. Don’t make that mistake.
Comments