Artificial intelligence latest buzzword to whip traders into a speculative froth, evoking memories of past bubbles
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Bloomberg News
Jeran Wittenstein
Published Feb 01, 2023 • 2 minute read
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The OpenAI website ChatGPT about page on a smartphone. Photo by Gabby Jones/Bloomberg A US$480-billion chipmaker whose processors are used for complex computing tasks. A digital-media company seeking to mine nascent technologies for content. A tiny software firm whose shares traded below US$1 for most of December.
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Access articles from across Canada with one account Share your thoughts and join the conversation in the comments Enjoy additional articles per month Get email updates from your favourite authors These are some of the disparate businesses whose stocks are benefiting from euphoria swirling around artificial intelligence (AI) — the latest buzzword to whip traders into a speculative froth — and evoking memories of past bubbles.
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The blistering rallies in companies that have AI in their names is reminding veteran market professionals of previous crazes like the one in 2017 sparked by blockchain technology. In that period, there was a dash for exposure — both from companies and traders — only to see the frenzy fizzle and stock gains disappear.
While AI is undoubtedly a huge growth opportunity and a theme that investors should take seriously, buyers should beware, said Michael O’Rourke of Jonestrading Institutional Services LLC.
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“We’ve had tons of episodes like this before where a group becomes hot and everyone just piles into everything related to it,” the firm’s chief market strategist said. “As far as everyone who’s betting on names and tickers, it will be a wild ride for them. If you’re speculating, you’re not investing.”
The massive popularity of OpenAI LLC’s ChatGPT tool has generated a lot of excitement about the potential use cases for AI since it debuted late last year. Microsoft Corp. is investing US$10 billion in OpenAI, which needs funding and cloud-computing power to run increasingly complex models. Microsoft said it plans to use OpenAI’s models in current and future products.
Nvidia Corp., the semiconductor maker, has been touted by Wall Street analysts as a beneficiary of greater investment in AI since it dominates the market for graphics chips that provide the computing power behind the software models. Its shares rallied 34 per cent in January, Nvidia’s best month in almost six years.
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The case behind the rallies in some other stocks are more tenuous. Shares in BigBear.ai Holdings Inc., which uses artificial intelligence to help customers analyze data, have soared fivefold this month. BuzzFeed Inc., the media company that’s been cutting costs amid a slump in digital advertising, jumped more than 300 per cent over two days last week after its chief executive pledged to make AI-inspired content part of its “core business.”
Recommended from Editorial Why the Canadian once in charge of Google’s finances thinks the tech giant should be broken up Crypto ETFs roar into life with eye-popping 2023 returns 5 things to remember when the company you invested in goes bankrupt C3.ai Inc., a software maker that counts Raytheon Technologies Corp. and Baker Hughes Co. among its customers, rallied a record 77 per cent in December.
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Article content Baidu Inc., China’s largest-search engine company, is also jumping into the fray. The company plans to roll out a chatbot service similar to ChatGPT, according to a person familiar with the matter, though the news this week failed to lift the stock price.
Until the bubble bursts, O’Rourke said he wouldn’t be surprised to see companies adding AI to their names or a jump in secondary stock offerings as executives seek to capitalize on the euphoria.
“It’s still early stages,” he said. “For all the names and tickers moving now, there will probably be three times as many in a month.”
— With assistance from Subrat Patnaik and Matt Turner.
Bloomberg.com