Will ChatGPT Drive a Tech Bull Market?

Will ChatGPT Drive a Tech Bull Market? — Sure it will. It got lazy mega tech off the dime, accelerated corporate computing upgrades, and will keep improving.

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Episode Notes

Note: The following is not a word-for-word transcript. For that, please see the episode on YouTube.

Colin in Chandler, Arizona asked via email whether I think OpenAI’s ChatGPT will drive a tech bull market.

Sure I do. Here’s why:

<> It finally got lazy mega tech off the dime.

The browser plugin is particularly dangerous to Google, et al.

Quote from last Sunday’s Kelly Letter:

“If ChatGPT users can do most of what they want without searching Google or visiting websites, the traditional online revenue model is in deep trouble. Google could lose much of its Search ad business as well as business from clicks on ads it places outside of its properties. For the first time in two decades, it’s possible that ‘online’ will not remain synonymous with Google.

“You know who dislikes this idea? Google.”

<> The need for accelerated computing, data center scaling, new chips, cloud and other AI services.

NVIDIA jumped all over this. From the Generative AI page on its website, you can get a sense for how it’s making more money on the wave of AI hype started by ChatGPT’s launch on November 30:

“Generative AI capabilities are taking the world by storm. AI can now summarize text, compose images, write code, and more. Enterprise applications need AI that’s customized to focus on their domain, be knowledgeable about their business, and have the skills necessary to accomplish high-value tasks. These models need to scale across business functions and learn as the business grows and evolves. Generative AI models will codify your organization’s intelligence.”

<> There’s a long way to go, plenty of room for improvement.

Originality may flatten out, as we’ve already seen in music, movies, and products recommended by algorithm. Algos get into a loop that then detects popularity among products that were in the loop before, and down the spiral we go until it’s nothing but templates everywhere.

Sigal Samuel wrote about this at VOX on Monday that recommendation algos, with their “you liked this, you might like that” approach end up homogenizing our consumption patterns:

“Music starts to sound the same; Hollywood worships reboots and sequels. We all cook the same Epicurious recipes and, more worryingly, read the same articles — which tends to be whatever plays well with the Google algorithm, not what’s been buried at the bottom of the search results.”

Partly this is a case of most people failing to grasp just about anything. How many technologies have we seen offer wonderful promise in concept, and to power users who get them, only to go off the rails once the crowds arrive? Social media springs to mind.

<> Early AI companies may not be the winners.

Just as Netscape did not end up owning the internet, so OpenAI may not end up owning AI.

This is a reason I prefer indexing.

Perusing the YTD performances through the end of last week, we see that general tech rose about 20% in Q1, same as most mega tech stocks and most unleveraged tech funds, and 3x funds rose about 60%.

YTD Price Change (%)
Through 4/6/23
– – – – – – – – – – – – – – –

85.0 NVDA
79.6 META
50.2 TSLA
26.7 AAPL
22.7 GOOG
21.6 MSFT
21.5 AMZN

61.9 SOXL Semi 3x
61.4 TECL Tech Select 3x
58.6 TQQQ Nasdaq 100 3x
19.8 XLK Tech Select SPDR
18.9 FTEC Fidelity MSCI IT

Because it’s hard to know who AI’s winners will be, I recommend using a tech index fund to invest in the technology’s potential. That’s what drives my 9Sig and Income Sig plans.


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