The Present and the Future of AI

AI has taken the world by storm this year. What do you make of both the AI story and the subsequent outperformance of AI-related stocks in 2023?

It has really been a fascinating and somewhat unexpected turn of events. The release of OpenAI’s ChatGPT and other public LLM rollouts, such as Google’s Bard and Bing’s chatbot, as well as the leaking of Meta’s LLaMA model, have attracted a lot of attention and interest from potential investors.

The very public way in which these systems were released allowed people to try the technology for themselves and test what it can do. This entirely new segment of the tech landscape holds the promise for unprecedented leaps in productivity and perhaps even a complete rethinking of how we perform certain tasks.

No wonder that this optimism resulted in the stock market boost, with AI-driven stocks getting the biggest returns, while everything else is flat, or even down, for the year. As an example, the metals and mining, financial, energy, utilities, and healthcare sectors are all currently down in 2023, while real estate, consumer staples, and materials are essentially flat. Meanwhile, the S&P 500 is trading above 4400.

Which stocks have benefitted the most from the AI story and which ones have the biggest potential moving forward?

We are seeing the big names such as Nvidia, Google, Meta, Microsoft, and Amazon reaping most of the rewards right now. It makes sense as these companies either provide the hardware, the cloud infrastructure, the software, the data the software is trained on, or a combination of the above. So, the nature of AI itself means that technology providers are positioned to be critical to AI now, and in the future as well.

However, the AI space is still in its infancy, so it is incredibly difficult to say which solutions will dominate the market. For example, Nvidia stock has outperformed thus far, purely by virtue of producing the chips that these AI data centers rely on, but their position is not entrenched. Their key rival AMD has recently released its latest AI chip to compete in this lucrative market.

Who will emerge as the dominant AI provider in the future is also probably the most speculative area of AI investing right now.

How is HYCM responding to the AI trend in its own line of business?

HYCM remains dedicated to keeping up to date with the latest trends to continue offering the most popular trading assets to its clients.

We have greatly expanded our equities offering recently to provide our investors access to over a thousand commission-free stocks from a diversity of sectors, including AI-related stocks. All the above-mentioned big tech stocks, Nvidia, Google, Meta, Microsoft, Amazon, and more, are available to invest in with 1:1 leverage. Moreover, investors can buy fractional shares of some companies for as low as $10 and earn income from dividend-paying stocks.

Many parallels are being drawn between the current AI interest, and the sentiment surrounding the internet during the Dotcom bubble. What do think about this, and do you see the connection?

There are a few similarities but it’s not quite the same. Yes, this is a new technology set to reshape the world, and investors are quite rightly getting excited by it. However, there are some facts that must be kept in mind. The speculative fervour surrounding Internet stocks in the late 1990s and early 2000s took place at the very dawn of technology, with hardly any of the infrastructure in place to make good on the future that everyone could see on the horizon. We didn’t have Wi-Fi, we didn’t have smartphones and app stores, and we didn’t have an entire generation raised on the Internet with no memory of a world before it.

The malinvestment that took place in the Dotcom era did eventually lead to these technological advancements that we enjoy today, and now we embark on this new AI journey with that infrastructure already in place as a foundation. For this reason alone, I don’t think we’re in a world today where the AI bubble could burst and the technology languishes in obscurity for another decade.

If you had bought Amazon at its height in 1999, you would have had to wait another ten years for that position to even be back in the green. While this is an important lesson for those allocating capital to AI-related stocks as they continue to surge, I think we might be operating at different timescales with this technology, as it’s developing at a rapid rate.

Finally, what would a future world look like in which AI achieves mass adoption?

I think this question really gets to the heart of the matter; we really don’t know, and that’s what’s so exciting about this moment. It’s also why the interest is so strong. The investors who were so certain about the internet in 1999 had no idea that they would eventually be accessing it via a touchscreen supercomputer they carry around with them in their back pockets.

I would like to be optimistic about it and hope that technology will be used to help individuals be more productive, rather than making them obsolete in certain areas. AI can potentially free us from routine, repetitive work, enabling us to focus on more creative, human-facing tasks. That’s definitely a vision that we at HYCM can get behind.

We must be realistic, though. This is a groundbreaking technology in its very early stages that seems to be evolving much faster than other technologies we’ve seen in the past. However, along the way, promising companies may fade as new technologies emerge, rendering previously profitable businesses unviable. As we’ve learned from previous transformative technologies, first-movers tend to be replaced by fast followers.

Google, Facebook, and Apple are perfect examples of this. Neither search, social media, nor smartphones were invented by these three companies, and yet they came to dominate in those respective areas. As investors, we must be unemotional, and not chase rallies simply because of a fear of missing out. This is going to be a much bigger story that unfolds over a far longer period.

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