If you would like to receive weekly updates like this, sign up here.
How do you know when hype turns into a serious money-making opportunity?
There have been a lot of previous trends that started out as pure hype, and even today, are still largely nothing but hype.
Off the top of my head: hydrogen-powered motor vehicles.
A lot of promise? Yes. A potential answer to cut fossil fuels out of our transportation industry and into a greener alternative? Sure.
Here I am though, still filling up on 98 octane.
But when it comes to Artificial Intelligence (AI), has the hype suddenly turned…real?
Source – The Guardian
A $4 trillion dollar rally is nothing to sneeze at, is it?
Please note the chips on the above image – they are made by US chipmaker Nvidia.
This rally has made them a trillion-dollar company by market capitalization – just the sixth one in history.
I know what you’re thinking. “I need to get IN on this man, stop stalling and tell me how!”
What can I say? It’s truly a mania out there currently. As we are deep into US earnings season, any company reporting earnings which even makes mention of being exposed to, or involved in, AI will see a stock price jump.
Since January nearly 500 companies in 27 sectors have made more than 3,500 references to generative AI and/or ChatGPT on their earnings calls.
No wonder!
So, is this THE way to truly play the second more speculative half of the real estate cycle?
Is this where your investment fortunes begin?
Or will government intervention to tighten regulation regarding AI’s impact on business and society going to kill the golden egg laying goose?
Well now, I guess you’ll need to keep reading, won’t you?
How hype turns into dollars.
First things first, let’s start from the beginning and lay the groundwork on what exactly AI is.
It would be imprudent of me to simply assume everyone reading this is knowledgeable about this technology.
Then we can truly gauge the type of opportunity we are looking at here is.
Artificial intelligence (AI) refers to the development of computer systems that can perform tasks that typically require human intelligence to complete. It involves creating intelligent machines that can perceive their environment, reason, learn, and make decisions.
Generally speaking, it can be summed up via these five main concepts. Machine learning, Deep learning, Natural language processing, computer vision and robotics.
Without diving too far into the weeds here, the basic concept is that via the above 5 concepts AI can revolutionize many aspects of our lives, improving efficiency, accuracy, and decision-making processes.
In terms of the market valuation of this technology, the global AI market has been expanding steadily. According to reports, the AI market size was valued at over $39 billion in 2019 and is projected to reach over $190 billion by 2025.
This growth indicates the increasing investment and adoption of AI technologies.
It also partially explains the wild valuation of any company even remotely exposed to this sector. Stock markets do a wonderful job of discounting the future into current prices.
This can help explain the current mania behind the incredible surge higher of the NASDAQ and AI related stocks that are listed on it.
Folks, this is a trend that’s not going anywhere in a hurry.
Which leads us to the $64,000 question. Should you invest in AI stocks today or in the future?
Let’s go to the source and ask, shall we?
What do I mean by ‘the source’? Do I know an expert financial advisor or fund manager who specializes in this technology sector.
I do in fact, but it’s not them I’m thinking of.
No, I truly mean “the source”. I’m going to ask ChatGPT.
A natural language processing tool built by OpenAI. So, let’s ask AI about AI, shall we?
After the usual formalities and asking how much richer I’d be if I didn’t have kids 19 years ago (kidding!!) I posed the following to ChatGPT.
Heres the question I asked: “How would you advise a brand-new investor in AI on how they should look to benefit from the AI trend today?”
Below is its response. I’ve taken the liberty to provide the abridged version for brevity’s sake.
Investing in AI can be done in various ways, depending on your risk tolerance, investment strategy, and available resources. Here are a few suggestions on how to potentially benefit from the AI trend:
- Invest in AI-focused Companies: Look for companies with a strong track record, a competitive edge in AI technologies, and a clear vision for the future.
- Exchange-Traded Funds (ETFs): ETFs offer a diversified approach to investing in AI. Look for ETFs that specifically focus on AI-related companies or emerging technologies.
- Venture Capital and Startup Investments: If you’re comfortable with higher risk and have the means to invest in early-stage companies, consider exploring venture capital opportunities.
- Research and Analyse AI Companies: Analyse their revenue streams, partnerships, and market positioning.
- Stay Updated with AI Trends: Attend conferences, read research papers, follow industry news, and engage in online communities focused on AI.
- Seek Professional Advice: If you’re new to investing or unsure about navigating the AI market, consider seeking advice from financial advisors or professionals specializing in AI investments.
It also provided the usual disclaimers and caveats of investing with your own capital.
So intrigued by its answers and thought process, I had to ask one more question: “Who in your opinion would you recommend are the best AI exposed companies to invest in?”
Again, below are the abridged version of its answer.
As an AI language model, I don’t have personal opinions, and I cannot provide investment advice or predict the future success of specific companies.
However, there are several prominent AI companies that have been leading the way in AI research…Companies such as Google (with its AI-focused subsidiary DeepMind), Microsoft, Amazon, IBM, and Tesla… Additionally, there are innovative AI startups and companies that specialize in specific AI applications, such as Nvidia in AI hardware, OpenAI in natural language processing, or companies focusing on robotics and autonomous systems.
How’s that! For a piece of algorithm, that’s quite impressive.
“Great Darren, thanks. Now I’ve got my shortlist to invest in”.
Um, about that.
When you see this happen, be very, very concerned.
A key part of due diligence is your ability to determine the potential risks to your invested capital.
Take note of some of the companies named above. They are amongst the biggest and most important companies on earth. Some of them less so. Let me show you why that’s important in a moment.
When it comes to technology, you absolutely need to understand what the government thinks about it.
Particularly a technology that is a total game changer in terms of how we will work and interact in the future. And they will happily tell you at any given moment when they are in favour of it. And vice-versa too.
So, you tell me how the UK government feel about AI?
Source – Guardian
Oh dear, what a way to potentially prick an AI tech bubble.
UK PM Rishi Sunak and his party are clearly worried about the potential danger this technology may unleash on humanity.
Consider just two months ago a white paper was released outlining his government policy and views on this. It is now considered obsolete!
His own chancellor Jeremy Hunt said at the release of the white paper that he wanted the UK to ‘lead the race’ for this technology!
But I digress.
From the Guardian article above.
Rishi Sunak is scrambling to update the government’s approach to regulating artificial intelligence, amid warnings that the industry poses an existential risk to humanity unless countries radically change how they allow the technology to be developed.
A Downing Street spokesperson said: “The starting point for us is safety, and making sure the public have confidence in how AI is being used on their behalf. Everyone is well aware of the potential benefits and risks of AI. Some of this tech is moving so fast it’s unknown.”
It’s worth noting here that humans are extremely poor when it comes to recognising when something goes exponential in growth or importance. So, I have some sympathy with this point of view.
And perhaps many of you would point out that this is the role that government should be playing in society. Particularly so when you read this (my emphasis).
In recent months, however, the advances in the automated chat tool ChatGPT and the warning by Geoffrey Hinton, the “godfather of AI”, that the technology poses an existential risk to humankind, have prompted a change of tack within government.
Experts say it will soon be possible for companies to use the technology to decide who to hire and fire, for police to use it to detect suspects and for governments to manipulate elections.
Certainly, these are all things to give you pause for thought.
It’s a powerful technology and like all such technologies it can be a blessing and a curse.
But we are interested to see if we can make money out of it via an investment. And so, you can listen to the hype (all those CEOs talking up AI). Or you can listen to the news about imminent government regulation.
Lastly you can consider it from a totally different perspective, one that no one else is talking about. The first clue was in the article I quoted above. Emphasis in bold is my own.
Last week, Sunak met four of the world’s most senior executives in the AI industry, including Sundar Pichai, the chief executive of Google, and Sam Altman, the chief executive of ChatGPT’s parent company OpenAI. After the meeting that included Altman, Downing Street acknowledged for the first time the “existential risks” now being faced.
Remember them? Two of the companies promoted to me by ChatGPT, no less.
Now the CEO of both is meeting with the UK PM? That’s interesting? The article continues:
Some MPs are now pushing for an AI bill to be passed through the Commons which could set certain conditions for companies who want to develop the technology in the UK. Some want to see the creation of an AI-specific regulator.
David Davies, Tory MP, said “We need an AI bill. The problem of who should regulate it is a tricky one, but I don’t think you can hand it off to regulators for other industries.”
Aha! The truth. Buried of course from the view of the masses. But not if you have the knowledge of the history of the 18.6-year Real Estate Cycle. Let me explain.
This is one of the most lucrative and cutthroat areas of tech to be involved in. What is the best way to ensure its your company that is the last standing and fully protected from any competitive pressures?
You get yourself a government-granted license.
And what do you know, there are Google and OpenAI CEO’s talking directly with the UK government about those licenses. Could they be ‘advising’ on what precisely should be in this new bill? Are they getting a head start on what’s required and can ensure they are best placed to benefit?
OF COURSE THEY ARE!
Geez, the government don’t know how to regulate this – who could they possibly ask about that? The companies they will be regulating.
One day, big tech is your mortal enemy, the next day it is your key ally and stakeholder.
What are your thoughts on investing in this space now? Do you know what the inherent advantages of companies are that can create a legal and government enforceable ‘moat’ around themselves?
If not, then membership of the Boom Bust Bulletin (BBB) is what you need. Because while we have never seen AI on this scale before in human history, we have seen the introduction of game-changing new technology, and its effects on the economy and which companies win and lose.
It’s part of an old story, with new players.
To understand what happens next and how to take advantage of it you need to understand the cycle and its history. So, please give me the opportunity to take you in depth into the cycle.
Learn about the over 200-year history of the 18.6-year Real Estate Cycle and why even today it continues to repeat like clockwork.
It will teach you how to decipher the news that we get bombarded with every day to focus solely on what truly matters.
You will be able to navigate the hype, ignore the negativity and noise. You will focus on the fundamental forces that drive the economy, the science of the economic rent and the timing inherent in the real estate cycle.
This knowledge all you need to succeed.
Yes, we’ve seen the markets’ reaction to the potential of AI since the start of the year. Expect some of this shine to dissipate as the market now works out whose earnings underpin their new price targets.
Now it’s the governments turn to lay their cards on the table.
History shows us that when this happens, there always ends up a handful of winners, whilst the rest are badly affected.
So, you need to understand what government granted licenses are, why they are created, and who benefits. Particularly if you do in fact want to deploy your investment capital into this sector.
For all its power and sophistication, you won’t get it out of ChatGPT either (see the answers it provided me above). Because AI will only ever reflect what most of humanity knows, not what it does not know.
This is not a concept you’ll be taught anywhere else. And that’s how the BBB can help.
As a Boom Bust Bulletin member you will receive 12 monthly editions a year detailing all the key turning points of the cycle, a deep dive into the most important markets across the globe and ways that you can personally benefit from this knowledge.
All derived from our unique and proprietary research – which you’ll not find anywhere else.
Plus, you’ll receive exclusive invites to BBB member-only webinars when we run them.
All this for just US $4 a month, less than a takeaway coffee.
Ok, time for me to sit the kids down and explain to them what they’ve cost me these last 19 years.
Best wishes,
Darren J Wilson
and your Property Sharemarket Economics Team
P.S. – If you would like to receive weekly updates like this, sign up here.
P.P.S – Find us on Twitter here and go to our Facebook page here.
This content is not personal or general advice. If you are in doubt as to how to apply or even should be applying the content in this document to your own personal situation, we recommend you seek professional financial advice. Feel free to forward this email to any other person whom you think should read it.