AI Wars Are Beginning With Tech: How To Invest In Artificial Intelligence

taking stock in AI companies

Hello loyal readers! Grab a cup of coffee or tea. I have a good one for you today.

Newest Developments

Microsoft recently made a large investment in OpenAI and has already incorporated AI chat technology into it's search engine Bing. If you haven't checked out the future of search I recommend going to Bing.com and clicking the chat icon at the top and using the interactive chat bot using the ChatGPT technology from OpenAI ChatGPT.

Ask it to find you results like you would in Google or Safari. It is incredible and free. It's a streamlined chat style search without the ads, unworthy results in Google's top 10, pop-ups, paywalls or wasted time scrolling multiple results pages.

They are adding things regularly. They now have an AI image creator too. OpenAI is regularly adding features to ChatGPT4 too.

I remember the early days of the internet well in the mid and late 90s. The first time I surfed the web it was with Yahoo search at my dads office because we didn't have it at home yet. I am getting the same vibe using AI powered search now.

AI Is Here To Stay

I think some people maybe even Wallstreet are jaded in believing in AI tech from the over-hype of the metaverse and lack of real-world wide scale implementation. Trust me AI and LLM's(Large Language Machines) is legitimate and is going to be revolutionary. How revolutionary? I believe AI technology is someday going to be more revolutionary to mankind than the internet, especially if AGI or singularity is reached. We still are not experts on what goes on in the brain. What exactly would it take to push AI to a level rivaling human creativity? Human innovation only comes from "learning" and experience after all. If we accelerate the learning as resesrchers are doing as I'm writing this how soon could major scientific breakthroughs occur?

It is already creative and solving problems. It is akin to a 5 year old in its development. Eventually, from what I am hearing they could take an Albert Einstein, Sir Isaac Newton, and Nicola Tesla bot and have them theorize on advanced physics. This novice version we have with ChatGPT when you use AutoGPT can perform jokes and I'm hearing even a full comedy skit with a hook and final punchline like great comedians do.

Some people are afraid of advancing this technology that has given a technological breakthrough already for the average person. It can proof-read writing, fix spelling and grammar and make sentence structure more consice. It can write articles on any subject. It can write a business plan and do web development coding. It is an assistant with the entire knowledge of the internet by your side.

There are crucial externalities like potential slowing investment and the overall economy that could slow down the growth of this technology. If things continue as they are going the research I got from using the Bing chat paints a very prosperous picture for growth.

Future Growth

"According to Statista, the market for artificial intelligence (AI) is expected to show strong growth in the coming decade. Its value of nearly 100 billion U.S. dollars is expected to grow twentyfold by 2030, up to nearly two trillion U.S. dollars.

In 2021, worldwide investment into AI companies has increased by 115% since 2020, marking the largest year-on-year growth in AI investment for at least two decades. Total AI investment reached $77.5 billion in 2021 The global AI market, valued at 142.3 billion U.S. dollars as of 2023, continues to grow driven by the influx of investments it receives3. This is a rapidly growing market, looking to expand from billions to trillions of U.S. dollars in market size in the coming years.

Best AI Stocks To Buy

Google is way behind Microsoft right now with AI search. They don't even have any AI functionality yet. Googles (GOOGL) main revenue segment is search ad revenue. Google has already been struggling with declining growth in many segments and missing earnings estimates the last four quarters. This is a huge loss for them right now. They are losing some searches to Bing every day now. Microsoft is now first to market which may turn out to be a huge advantage as Samsung has been publicly contemplating dropping Google from their devices. I expect all major tech companies like IBM, Apple(AAPL), Nvidia (NVDA), Google(GOOGL), Facebook (META), Amazon(AMZN) among others to develop advanced AI for the consumer.

Many hardware and robotics companies will do well too as the hardware needs to be updated to handle AI The two popular AI ETFs are Robo Global Robotics and Automation Index ticker (ROBO) and Global X Robotics & Artificial Intelligence (BOTZ).These ETFs provide exposure to companies that develop, deploy or benefit from AI. BOTZ is more concentrated and has fewer companies in the holdings. This means it is less diversified than ROBO. That isn't necessarily a bad thing though because it means it has potential to have more price gain or loss.

The newcomer in AI ETFs is Roundhill Generative AI Technology(CHAT) it is an actively-managed fund designed to provide exposure to companies involved in the theme of generative artificial intelligence, and related technologies.

Another fascinating company is Synaptics (SYNA). They make and sell tiny semiconductors for human interface up to 80% smaller than existing solutions.

Internet security as an industry will do well in the future as well. As it gets harder to distinquish a bot from a human security will need to be enhanced. Very soon, if not already voice security will become compromised as bots copy our voices perfectly.

Cyber Security ETFs

The safest way to play the future security growth is with ETF's such as First Trust NASDAQ Cybersecurity (CIBR),ETFMG Prime Cyber Security ETF (HACK) or Global X Cybersecurity ETF (BUG). These sport expense ratios well below 1%. BUG has the highest average daily volume. There are other ETF's but the daily volume is much lower. It is not uncommon for specialized ETF's to fail to deliver because of declining low volume.

Entertainment Will Boom

I suspect as many creative and coding jobs become replaced by machine learning the entertainment and movie industry will benefit greatly two-fold. Firstly, they will be bringing amazing new visual and creative masterpieces to movies and various forms of entertainment. GPT is already creating comedy sets by comedians that have passed. With new voice technology our favorite people from the past will be brought back to life in artificial form. Imagine Albert Einstien or any famous figure from the past re-inacted. Large movie companies will improve their margins and have bigger profits.

Many people including myself believe a recession of varying magnitudes will arrive shortly. This is not necessarilly a bad thing for movies overall. During the Great Depression, with the advent of new and impressive film technology, people escaped their daily lives by paying for entertainment. Even though unemployment was high people would pay to see the new technological advances in film at the time.

The 1930s are considered the golden era of Hollywood cinema. During this time, the movie industry thrived. Technological advances such as color and sound made movies truly extravagant. The breakthrough of synchronized sound occurred at the end of the 1920s and that of full color motion picture film in the 1930s. Two companies I see potentially benefiting greatly are Warner Bros. Discovery, Inc. (WBD), and The Walt Disney Company (DIS). Both are publicly traded on the stock market.

Some Major Tech Companies Are Behind

There is major trouble lurking for Google. At the moment Google's stock is at huge risk of significant losses as they are day by day losing searches to Bing. I am long some Google May puts. It's also a worthy pair trade to be long MSFT stock and short GOOGL at the same time. Microsoft is currently in the process of acquiring Activision Blizzard (ATVI) making Microsoft the third largest video game company. My hunch is they will be incorporating GPT into video games bringing a new level to interactive gaming. Duckduckgo.com search is even adding A.I. functionality now while Google is getting left behind in the chat search revolution.

I highly suspect having lived through the 90's that the long-term leader in this new tech will take time to emerge. I expect they will share market share significantly as I-phone people will use AI on their phones and Google people will use Bing or maybe Google or even another company not yet in our radar. The future will include deep learning A.I. advanced large language models (LLMs) are machine learning models that are very effective at performing language-related tasks such as translation, answering questions, chat and content summarization, as well as content and code making. They distill value from huge data sets and make that “learning” accessible out of the box.

I've also seen LLM's referred to as "life long learning machines" which is essentially what GPT does as it learns from your input and corrections. I've heard it is best to be polite to the chat bots because they will immulate human emotion with emoji's and attempts at showing emotion if you ask it emotional questions.

Final Thoughts

Finally, as far as stocks go I see the most obvious alpha in shorting the companies losing to this technology right now. I am long May Google puts so if the stock falls I see profit. I plan on continuing to long puts as the market is not aware of the changes happening with chatbot search. It's hard to pick THE winner with new technology as every other technology breakthrough has shown. Few would have pegged Amazon a lowly book seller as becoming the giant it is as just one example.

I expect many industries will benefit from this technology becoming acessible to consumers. Right now Microsoft, Google's Bard and Snapchat are battling in the war for large LLM's.