Artificial Intelligence has Ballooned Some Stocks




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This is a Guest post by Giuliano, the author of From 0 to 1 in the Stock Market, a Newsletter about fundamental principles of the Stock Market. We were chatting about how enthusiasm for A.I. is impacting the stock markets in early 2023. He was gracious enough to offer to write about it.Editor’s Note:

Asset prices are defined by signals people give, in the form of buying or selling. These decisions are taken at an individual level, according to infinite factors. The most important of them, generally, is what’s the expected return of an asset, in contrast to the risk such asset supposes. That’s why the market is forward looking, because it’s on the future where people place their decisions and, at the end of signal’s chain, prices are set.

Since that’s the case, every event affecting people’s future expectations will invariably lead to a change in their decisions. About two months ago, a brand new product was publicly released (in its beta version), Chat GPT. Fast forward to today and this unique ‘search tool’ has reached 100M users, the fastest usage growth achieved in history.

Go here to read this article with images.

Now, imagine how big of an event this is. This disruptive search engine that leverages Artificial Intelligence has led to a complete change in people’s future expectation in regards to AI. The following chart displays how rapid AI search rose.

Interest in ChatGPT Skyrockets
An almost vertical rise in Chat GPT searches have occurred since its release, with the curve continuing in a pronounced uptrend in 2023.

The reason for me mentioning this is because it’s the most relevant event that has taken place in the AI space for the past few years. Things of this magnitude not only affect future expectations, but they also spill. The following chart illustrates how Chat GPT spilled to the general market and how the market started absorbing this new knowledge to then price it into assets.

That’s how hype is built and how it reinforces itself, making people bid higher and higher for assets such as stocks, potentially achieving crazy returns in a short time span. Here’s an example of how the trend has affected AI stocks in 2023 within different industries and sizes. Keep in mind this article is being written on the 6th of February.

1. Microsoft and Google

Microsoft and Google are both very intricated in this industry and I decided to group them together on this section given the very recent ‘war there’s been between them.

Microsoft is one of the leading companies in the technological world and they have a vast portfolio of products exposing them to artificial intelligence, automation and machine learning. Microsoft Azure is their cloud computing player, a very heavy weight.
You see where I’m going? Microsoft offers a LOT of ML/AI/automation capabilities through their different products and they are all powered by Azure. Furthermore, the most brilliant AI coders have recognized that Microsoft has the best infrastructure for building AI:

“Microsoft, and particularly Azure, don’t get nearly enough credit for the stuff OpenAI launches. They do an amazing amount of work to make it happen; we are deeply grateful for the partnership. They have built by far the best AI infra out there.” Sam Altman (OpenAI CEO)