Torpid global economic growth sustains recession fears, which worsening Chinese economic data further fuel.
True “all-weather” growth stocks are rare – so investors bid them up. AI-related technology is part of that but no game-changer yet. I have asked hundreds of businesses about this and can say its present practical uses are mundane: efficiency gains from automating repetitive tasks, cost reductions and marketing fluff. Some research has suggested that ChatGPT’s coding and calculating abilities are actually getting worse – newer versions often flunk basic maths questions.
Neither is AI altogether new. The great Bletchley Park codebreaker Alan Turing foresaw AI’s advent way back in the 1940s (and later devised what would be known as the “Turing Test” of machine intelligence). Wimbledon-born Geoffrey Hinton, the “godfather of AI”, built on Turing’s research in the 1970s and eventually won the prestigious award that now bears Turing’s name.
Tech start-ups pursuing AI attracted venture capital for years before ChatGPT, too. Big tech firms used profitable divisions to subsidise AI research and development. They had an advantage over most tiny start-ups, because the computing power needed to train these systems is both massive and massively expensive. Hence the big players in chips, software, data and search dominate AI now.
Should you seek AI pure plays to invest in? Trying to pick far-flung, long-term winners is folly – as today’s myriad floundering AI start-ups show. Even the British “unicorn” Synthesia has seen flat or declining user growth over the past six months. Buying any of these companies now means guessing which start-ups’ margins will justify premium valuations. No one can accurately predict the winners. Most are private firms, too – illiquid with sketchy valuations. Beware!
My advice is to tune out the fear of AI when you invest. Revolutionary claims and AI firms’ fickle fortunes necessitate a clear-headed approach. Some AI exposure may be beneficial, but don’t make it the deciding factor over whether to own or avoid a particular stock or sector. Seek high-quality growth now. AI is just the cherry on top.
