AI In the Market Place, Pt. 3:
Humpty Dumpty Teetering on
the Wall Street
I can write with some degree of authority about how the immediate and
universal adoption of the multimedia World Wide Wide brought about by
the invention of the multimedia web browser Mosaic because, for years, I
helped facilitate that change happening in my local community. I
claim no such expertise at all when it comes to forecasting future
economic trends. I only know what I read
in the e-papers.
Many noted forecasters have put on those green eye shades, looked into their crystal balls, and none but a few are sanguine in their respective forecasts. Most noted among these is Jim Cramer of CNBC, who says "You have to be ready for a sell-off." (paywall after headline).
Insider posted, June 18, 2023, a summary of what seven of the most noted financial soothsayers think lies in store for the American economy in the near term, and what the impact of AI will be on both the American and the global economy.
Michael Hartnett, chief investment strategist at Bank of America Global Research, sees AI beginning to form its own "baby bubble" for now. Bank of America's "investment strategy team recalled the frenzy surrounding internet stocks in 1999 that drove the Nasdaq Composite up to new highs at 5,000." Harnett, however, recalls the aftermath of such rampant speculation: "The Nasdaq sank 78% from its March 2000 peak until early October 2002." James Penny, Chief Information Officer for TAM Asset Management, seems to agree with the sentiment of BofA investment gurus. The CIO is quoted as saying that the current market conditions, especially surrounding AI, "smells very much like the dot-com era."
According to his bio on CNBC, "Arthur D. Cashin, Jr., is a managing director of UBS Financial Services Inc. He is the Director of Floor Operations for UBS Financial Services at the New York Stock Exchange." He, too, sees the echoes of the 1999 dot com bust in today's market. Cashin notes that a few stocks have soared with the favorable AI winds. Since the AI bubble is forming now, Cashins cautions, "AI is going to be a new mini-version of the dot-com." David Rosenberg, of Rosenberg Research, agrees with the 1999 parallel. Rosenburg wrote on Financial Post, May 25, 2023, that "Microsoft Corp.’s expansion of its investment in ChatGPT back in January has kicked off an “arms race,” with megacap competitors quickly following suit in announcing their own plans." The publicity set off a buying frenzy in AI related stocks, which is now:
... creating an environment that echoes the dotcom craze back in 2000. It is hard to miss the bubbly feel to the price run-up that started at the beginning of the year, first with Microsoft, and now spreading to Google’s parent Alphabet Inc. and beyond. For investors wanting to look into this theme for their portfolios, caution is warranted given the seemingly euphoric environment at this time.
Ending this 3 part post with whom we began, Dan Ives of Wedbush Securities, projects "massive cost cutting across the tech sector the last 9 months, stable enterprise spending, and a resilient consumer, we believe the stage is set for a '1995 moment," he wrote.
It is clear today's IT business climate is unlike that of 1995, and that of over a decade afterward. In the 1990s, King Consumer reigned over skyrocketing computer sales, and the associated goods and services. The Consumer drove the booming economy of the 1990s. This time around, it appears that the "resilient consumer" is so far sitting out the AI craze.
Never in our lifetimes has a new product been met with such overwhelming apprehension among the buying public. It is understandable that King Consumer and his minions are not yet flocking to a product that is predicted by some experts in the field — even among those responsible for bringing AI into the marketplace — that the product might bring about the Extinction of all humanity. So, at least for now, The King Has Spoken.
Is AI alive or is it dead?
Does it know the thoughts in my head?
We'll just pass it by
Let some others believe all those lies
— Apologies to
Black Sabbath
¯\_(ツ)_/¯
Gerald Reiff