This email is in response to many questions we have received about the recent developments in AI (Artificial Intelligence) and what it means to the markets, economy, and investing. If you have any questions about this or any other topic, you can reply to this email and we can cover it in future emails!
AI has breathed fresh air into the stock market over the last six months, with a lot of positive speculation about the boost it could provide to the economy. The next logical question is if the excitement is real or misplaced and if real, how to position the investments accordingly. Without question, the technology is a leap forward in regard to the efficiency of (highly paid) software engineers. Brian Chesky, CEO of AirBnB estimates his software engineers will be 30% more efficient by the end of this year using Chat-GPT and similar programs. This is a big deal for software companies, considering one of their largest expenses are highly trained engineers, who now have 30% more free time to pursue their employer's next project.
Currently the term “AI” is being used for a variety of technologies, with the majority centered around Large Language Models, or LLMs. The most popular program to date is Chat GPT, which uses the publicly available internet (up until 2021), which serves as its body of knowledge (its language). It then uses advanced computing to analyze and learn connections between various sources of relevant data, and outputs that information in a conversation-like format, based on prompts from the user.
Along with text/language, other variations of AI technologies are popping up with audio and video as well. If you have ever wondered what Johnny Cash would sound like singing “I’m a Barbie Girl”, AI has got you covered: https://twitter.com/ctoLarsson/status/1681739564749058048?s=20 Video is the next (slightly frightening) frontier for AI. Currently, experts are estimating it will take about two years until a small team of AI engineers can produce a studio production quality movie, for a fraction of the cost. This video is an illustrative, fully AI-produced food commercial. https://twitter.com/thedorbrothers/status/1679902794604589057?s=20 Also, part of the reason actors in Hollywood are striking is due to disagreements on how AI will be used in TV and Movie production. In theory, if a lead actor quits mid-shoot, AI would be able to recreate the actor so the movie could be finished digitally. This also opens up the door for us to question what we see/believe in videos, with videos commonly known as deep-fakes.
The next progression of LLMs will be centered around utilizing more specific (as opposed to general) bodies of knowledge, which are concentrated in large, and generally private data sets. Some of the most significant and immediate use cases for this would be medical information, as well as the personal data we have on our phones. While I am sure this immediately sent up red flags, AI has the ability to quickly connect the dots on massive amounts of medical data, providing more accurate diagnoses, treatments, and medicines, ultimately saving lives. Furthermore, imagine you are arguing with your spouse via text, and your iPhone (‘knowing’ both of you and the emotional states you are in) nudges you to not send what you are typing and suggests something more... constructive. The possibilities are endless.
Months after the public release of Chat-GPT, Microsoft invested billions in the parent company Open AI. Shortly after Chat-GPT was released, Google released their competitor Bard. In Late July, Facebook released its new open-source AI programming language, which they made available for free for both private and commercial use. Finally, insiders at Apple have confirmed they are working on their own version, internally known as Apple-GPT. Given that all the main players of technology are significantly investing in space, not only is AI here to stay but there is essentially an arms race to see who can utilize the technology most effectively.
With the outbreak of any new technology, it is impossible to predict a singular winner, and a more realistic outcome is to understand that AI is a technology that is a rising tide for all boats that utilize it effectively. It is clear that tech incumbents are investing significant time and resources into the technology, and hundreds of start-ups are being created to use the technology to provide solutions for customers willing to pay. In our opinion, we believe the best approach is to invest in an index or basket of companies, rather than betting on one company to outperform. It is also important to exercise restraint. While the technology is getting many people very excited about the potential, humans are vulnerable to extremes of emotion. As in all things in life, moderation is key, and the emergence of new technology is no different.
As always, if you have any questions please do not hesitate to give us a call!
Citrus Wealth Management
O: 909.312.4412 // F: 909.312.4441
1461 Ford Street, Suite 103, Redlands, CA 92373
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Citrus Wealth Management and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.