Think of a bridge. Or a highway. They’re all built speculatively. Build them. The traffic will come. Or it won’t. But usually does, because the design (and justification) are built on a long foundation of experience.
We don’t have that history with AI. What we have is the enthusiasm of smart individuals, who are fascinated with the new exponential computer power — no longer progressing at a gentlemany doubling of speed every two years (Moore’s Law), but of a million-fold power increase every single year.
I lived for forty years through the doubling. It pleased me to do the same things a bit faster ever couple of years. I have a three-foot pile of ever-faster, discarded laptops as testament. But it was always doing the same things a bit faster. Think of what’s in Microsoft Office — Word, Excel, Access (database), PowerPoint, Outlook (email). It’s been that way for 40+ years.
Along the way Access got morphed into huge corporate databases with defined, specific fields of data. As we aged, if your new data didn’t fit the old bins, we’d invent a new bin and another one and another one. Until we had today’s mass of incompatible databases. That’s why corporations today are making the wrong products, selling the wrong services to the wrong people.
Examples: Today’s abominably awful customer “service” chatbots. Or sending me pricey glossy printed catalogs of women’s clothing. (I don’t dress that way.)
Suddenly, ChatGPT appears. And Perplexity. And Copilot. And Gemini. And Grok. And Sora. And a zillion others.
They’re not Microsoft Office ror are they corporate databases on steroids. They’re a whole new kettle of fish. They’re a gigantic brain somewhere out there that will do what’s most useful to you and me- in our daily personal or business life.
Something like $5 trillion is being slated for spending on data centers — and their componentry — from chips to racks to buildings. And electricity to make them do the tasks we want done and are willing to pay for.
This is infrastructure. But an infrastructure we’ve never experienced.
Bridges. Roads. Rail lines. Electricity grids. Our brains instantly know them and what they allow us to do.
But AI? I pay Perplexity $20 a month for information on stocks. Susan is using it to produce the best pumpkin mousse. I use Gemini to help me with techie stuff — like why doesn’t Ctrl+P in Chrome produce the perfect PDF of a web site?
All my business friends are obsessed with AI. They know it will increase their productivity — which means that AI is (or could be) one of their most profitable investments ever. Better than the new factory. Better than a down-the-line forehand winner.
Maybe AI will be able to save on all those semi-dumb people we see manning supermarket checkout counters or tellers cashing tiny checks in bank branches.
Every data analytics firm is wrestling with The BIG Question: Will the personal and business AI take-up be sufficient to justify the ever increasing prices of stocks like Nvidia, Broadcom, Google, Palantir, GE Vernova and AMD? Will the returns bring us $5 trillion and more?
Recently, every financial reporter, economist and TV talking head is opining on “Will it? Or won’t it?”
“Will AI be the Dot-Com bust all over again. Or, worse, the Dutch Tulip bust.”
Below are some of the pieces I’ve read in recent days. If you’re motivated to get thoroughly confused. you should read a few.
My own view is simple: AI is the most exciting and potentially most rewarding tool I’ve ever experienced in 65-years. Yes, it’s been that long. I’m 83. I started writing about business for the Australian Financial Review when I was 18. The AFR is like the Wall Street Journal, but written in real English.
This week’s Economist talked to gurus on the AI take-up and concluded:
Organisations will learn how to incorporate AI more efficiently, while the models themselves should continue to improve. If evidence mounts of the transformative effect of the tech on workplace efficiency, more companies will come to realise that they cannot do without it.
Investment implications
+ I like Nvidia foremost. Its chips are magnificent. Most importantly, it has built an encompassing milieu, covering everything from the software to design applications to detailed suggestions on applications — from robots, to virtual factories. to health care to self-driving cars. As the AI leader, its stock attracts slings and arrows from professional short sellers to talking heads that gain public attention to for their negative comments. In recent months many amateurs bought Nvidia and bitcoin together on margin, figuring that the path up was forever. It wasn’t. And NVDA is now down 14% from its high in November.
+ I like Google. They’re making their own AI chips and they’re using them intelligently in their extraordinarily profitable search business. There are very few businesses on the planet that can match Google’s gross margins. Their new Gemini AI engine is superb. Try it, while it’s still free. Listen to Acquired’s latest podcast on Google.
+ I like META (Facebook) because Mark is weaving it into an advertising power house. I will admit to being hooked on Instagram, and its many tennis videos.
+ Apple is great because of its gigantic loyal user base and its App Store commission revenues. But don’t buy an iPhone 17 until they get the bugs fully out. I’ve stopped using physical credit cards. I now only use Apple Pay on my iPhone. It works everywhere.
+ There are many many “picks and shovels” companies — many of which are doing extraordinarily well. Like GE Vernova to TSM, to ASML, even Caterpillar. Look in the right hand column of my web. You’ll find more names. For a massive list, ask Perplexity “Who are the picks and shovels companies of AI?“
+ I don’t think your or my portfolios should be AI centric. My holdings of Barrick Mining, a big gold miner, are up 48.46% — more than double my Nvidia. My biggest gainer is GSAT. Go figure.
Is this AI, or makeup or the real thing?
This is grandson Peter, turning 10 in January.
He may or may not have had a run-in with a small car yesterday.
His new motto is CHECK. CHECK. CHECK.
I prefer “Look both ways twice.”
Articles to read on AI risks
+ Multiple Market Volatility Underscores Epic Buildup of Global Risk
Some experts see a dangerous combination of factors reminiscent of practices that led to previous financial crises.
Click here.
+ The A.I. Boom Is Driving the Economy. What Happens if It Falters?
A windfall for companies that build data centers and their suppliers is overshadowing weakness in other industries.
+ AI Trade splinters as Google takes on Nvidia.
Investors are sending two leaders of the AIRtrade in opposite directions
Click here.
+ Tech Insiders Feeling Skittish over A.I. Boom
Spending Soars, but so do debt and risk
Click here.
The bottom line
Do not sell, despite the avalance of pessimism.
Emotions are overdone, both upwards and downwards. It’s human nature.
Slow and steady doesn’t make it. And has never made it in a counry like America, which subsitutes enthusiam for intelligence.
AI is fantastic. It will change and improve the way we live and work.
We have much to give thanks for today.
I wish I were 18 again.
Ken Burns masterpiece The American Revolution
If you haven’t been watching this, you’re missing out on a masterpiece.
It’s streaming free on PBS.
See you tomorrow. — Harry Newton
