ChatGPT

The explosion of artificial intelligence or AI over the last several years has been extraordinary, and the reality versus the expectation has ranged from jaw dropping wonder to cynical disappointment.  The reality is that AI is with us to stay and will profoundly shape our future in ways you might not have considered.

In this note, I’d like to encourage you to begin using AI if you haven’t already started.  We will consider some of the long term implications for society, because things will change fast in the coming years.  And, of course, we will touch on investing in AI, so a bot doesn’t run off with your money!

Give it a Shot!

If you use the internet, chances are you’re already using AI on a regular basis, whether you realize it or not, since it now underpins even basic searches.  If you haven’t already, I encourage you to try a free popular model such as Claude, ChatGPT, Gemini, or Perplexity.

One fun experiment might be around recipes, ask an AI for a recipe that uses certain ingredients, reflects a certain cuisine or both.  Don’t be afraid to be bold or silly, you won’t break it.  Another fun use is for travel planning, tell it where you might want to go, and ask for itineraries, places of interest, places to stay, where to eat, flights, etc.  Engage in a dialogue about a subject that interests you.  Don’t expect perfection.

Simply engaging with the technology will help you understand how it behaves or “thinks,” how it might be useful, and how it might be limited.  For those of you who are old enough to remember, this is a lot like when the internet started becoming popular.  You might remember the reluctant adopter finally giving into the hype and becoming a heavy user.  It’s at that point that AI technology might seem less mysterious and “scary.”

How big will this get?

To give you a sense of scale, a recent article in The Economist notes Meta’s plans to build an AI data center the size of Manhattan that consumes the same amount of electricity as New Zealand.  The same article notes that Open AI, the creators of ChatGPT, plan to spend $500 billion in the U.S. just to keep up with demand.  Other players in this space are launching similar plans, and this is already happening globally.

To give you a sense of what’s already possible the same article notes: “Earlier this month the Forecasting Research Institute (FRI), another research group, asked both professional forecasters and biologists to estimate when an AI system may be able to match the performance of a top team of human virologists. The median biologist thought it would take until 2030; the median forecaster was more pessimistic, settling on 2034. But when the study’s authors ran the test on OpenAI’s 03 model, they found it was already performing at that level.”

It’s getting so big that promising young programmers are accepting that AI might wipe them out professionally.  Even the most basic models will write computer code for you in whatever popular programming language you select, such as Python.  If you want to get into the “app” business there are companies claiming an ability to take your plain English idea, create the code, and ultimately an app you can launch in an app store, all done by AI.  What if we ran the AI software on a robot?

The military has been using AI and robots for decades in the way of drones and things we probably don’t have the clearance to know about.  We already see AI in the self-driving taxis offered in some cities by companies such as Waymo.  Some restaurants are using robots to prepare and deliver food, and robots are being used in place of traditional security guards for office space.  Humanoid robots are also becoming widely available.

Unitree, a Chinese company, offers impressive humanoid robots.  They already have back orders on these machines.  Amazon has been rapidly expanding its use of robots in warehouses.  Because computers are relatively seamless these days thanks to wireless technology, the integration of AI and very capable robots is not hard to imagine.

Trying not to scare Boomers, but robots are already taking off in elder care in Japan with impressive results.  Japan has been suffering from a shrinking workforce, and the robots are able to fill some of these gaps.

It’s not hard to imagine home humanoid robots running cutting edge AI and doing everything from yard care to cooking and cleaning.  Imagine shopping at the grocery store next to someone else’s robot out running errands.  Yes, we’re on the verge of science fiction becoming reality.

How Can I Invest?

Chances are you’ve already been investing heavily in AI for years.  The largest technology firms have been part of the AI revolution from the start.  If you have an investment account that holds something like the S&P 500, you probably already own names like: Nvidia, Microsoft, Google (Alphabet), Amazon, Meta, and Apple within that portfolio.  The performance of these stocks has been a major driver of recent stock market gains.

If you are looking for smaller firms that will be the next big Google, good luck, it’s a very challenging undertaking for several reasons, such as private equity, acquisitions, and a crowded field.

Small firms typically seek venture capital funding in early stages.  We live in a world where private equity firms may step in prior to or in lieu of a public offering. Large firms, such as Apple, may acquire valuable, small AI firms directly from founders or from venture capital and private equity firms, bypassing public markets.

AI firms that do go public may have astronomical valuations compared to what they may actually be worth because the venture capital and private equity firms are attempting to cash in on their investments with the public providing the cash.  It could also mean a firm was not interesting enough to attract venture capital or private equity, and the founders decided to go it alone.  The reality is that if you slap the letters “AI” on anything right now it’s going to seem sexy to someone.

This is not to say that there are not great opportunities out there in the public markets, but the takeaway is that you must be extremely careful with what you decide to buy.  Buying shares in small, stand-alone AI firms is an exercise in speculation, not investing, and it’s important to always be clear about where you’re investing and where you’re speculating.  With speculation, you should always be prepared for a total loss.

If you are a long term investor holding a portfolio or large, diverse, high quality stocks, there is no need to engage in Fear of Missing Out (FOMO).  You’ve already been investing in AI since the beginning.  As this technology evolves and changes, new companies will rise and become part of these blue chip indexes.

It’s important to accept that not only will things be changing rapidly in the coming years, but that acceleration will accelerate too.  There will be bumps and painful lessons as we learn to live with this powerful new technology, but hopefully it will be tremendously beneficial in the long run.

If you haven’t tried AI, it might be time to dip your toe in the pool.  It will make it less mysterious, and you might even have some fun in the process.

 

 

 

Buoyant Financial, LLC is a registered investment adviser located in Charlotte, NC. Buoyant Financial may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. A copy of Buoyant Financial’s current written disclosure statement discussing Buoyant Financial’s business operations, services, and fees is available at the SEC’s investment adviser public information website – www.adviserinfo.sec.gov or from Buoyant Financial upon written request. This note is for informational purposes only, and should not be construed as investment advice, or a recommendation to buy or sell securities.