- Investors race to assess the rise of artificial intelligence as a possible ‘iPhone moment’
Charley Grant, WSJ
NEW YORK
EnergiesNet.com 05 10 2023
The rise of artificial intelligence is taking the tech world by storm. The technology is also making waves on Wall Street.
It is early days for so-called generative AI, a form of artificial intelligence that can conjure original ideas in the form of text, video or other media. But the tool has caused a stir in companies, schools, governments and the general public for its ability to process massive amounts of information and generate sophisticated content in response to prompts from users.
Big technology companies are investing billions of dollars in the technology. Startups are raising cash and trying to develop business models using AI at a rapid pace.
Investors are gauging the extent to which AI’s arrival will upend companies, industries and contemporary business practices—and placing bets accordingly. That has sent stocks swinging wildly in both directions: Chip maker Nvidia’s shares are surging, while shares of study-materials company Chegg CHGG -1.19%decrease; red down pointing triangle have plummeted. Enthusiasm for the potential of AI is one reason big tech companies are among this year’s strongest performers.
There is little doubt that generative AI chatbots are popular. ChatGPT reached 100 million users in two months, the fastest app on record, analysts at Goldman Sachs said in a research note. In comparison, TikTok took nine months to reach that milestone, while Instagram took 30.
“We view AI as huge, and we’ll continue weaving it in our products on a very thoughtful basis,” Apple Chief Executive Tim Cook said last week on a conference call with analysts.
Apple isn’t alone. There have been more than 300 mentions of “generative AI” on company conference calls worldwide so far this year, according to data from AlphaSense. The phrase barely garnered a mention before 2023.
Major health systems are experimenting with AI to see whether the technology can help boost the productivity of their medical staffs. Entrepreneurs and venture-capital investors hope generative AI will revolutionize businesses from media production to customer service to grocery delivery. Even Coca-Cola told investors it is experimenting with the technology.
Some investors wonder whether generative AI is the latest tech with the potential to disrupt entire industries. The dawn of online streaming spelled the end of home-video-rental companies such as Blockbuster, while cameras on phones helped render photo processing obsolete and helped spark Apple’s rise and Kodak’s decline.
Major health systems are experimenting with AI to see whether the technology can help boost the productivity of their medical staffs. Entrepreneurs and venture-capital investors hope generative AI will revolutionize businesses from media production to customer service to grocery delivery. Even Coca-Cola told investors it is experimenting with the technology.
Some investors wonder whether generative AI is the latest tech with the potential to disrupt entire industries. The dawn of online streaming spelled the end of home-video-rental companies such as Blockbuster, while cameras on phones helped render photo processing obsolete and helped spark Apple’s rise and Kodak’s decline.
Major health systems are experimenting with AI to see whether the technology can help boost the productivity of their medical staffs. Entrepreneurs and venture-capital investors hope generative AI will revolutionize businesses from media production to customer service to grocery delivery. Even Coca-Cola told investors it is experimenting with the technology.
Some investors wonder whether generative AI is the latest tech with the potential to disrupt entire industries. The dawn of online streaming spelled the end of home-video-rental companies such as Blockbuster, while cameras on phones helped render photo processing obsolete and helped spark Apple’s rise and Kodak’s decline.
Those moves might prove ephemeral as the technology’s power becomes clearer, said Daniel Morgan, senior portfolio manager at Synovus Trust. “The most difficult thing to ascertain is, what is going to be the impact of all that spending to these companies on revenues and profits?” His fund owns shares of Microsoft, Alphabet and Nvidia.
The flurry of investor interest has pushed valuations higher. Nvidia trades at 164 times its past 12 months of earnings, according to FactSet. Microsoft and Alphabet trade at 33 times and 24 times, respectively.
Portfolio managers said the race to understand the implications of AI’s emergence is essential, both to invest in the technology’s winners and to avoid its eventual losers. Shares of Chegg fell 48% last week after the study-materials company said that the rise of ChatGPT was harming its ability to attract new customers.
“You just don’t know all the knock-on effects,” said Will Graves, chief investment officer at Boardman Bay Capital Management. “If this really is an iPhone moment, nobody saw that Uber was coming out of the iPhone to hammer the taxi industry.”
Write to Charley Grant at charles.grant@wsj.com
wsj.com 05 09 2023
