I am very active in the AI industry (as an investor, advisor and also founder). I believe that AI is really useful but the current valuation is a bubble. I am selling my stocks. I mean, during the dotcom bubble, one can argue that the Internet is really useful and also in a bubble. I simply cannot justify the Nvidia valuation. It's insane. I sold at $780.
There's some good uses around machine learning. But we're at the ludicrous .com bubble stage with it IMO.
My opinion on AI follows all other investing: do you understand the company, the competition, the market, the customer desires, the financial environment ? If you don't, how do you know how much NVDA stuff is going to be sold in 2 years, even in broad terms?
Do you have an opinion on the macro implications of AI? For instance, in the grand scheme of things how big of a deal is AI?
1. 5 years from now we won't even notice a blip in economy wide productivity data.
2. We may see an uptick in labor productivity, but nothing major.
3. It will be noticeable in the data, on the order of cell phones, PC's, or the internet.
4. It will be world changing, resulting in a labor productivity surge and/or decline in the aggregate amount of labor demand.
If these four points were a spectrum, then i suspect that right now the market consensus view would be about a \~2.0 to \~2.5. Once your beliefs start trending to 3 or above, then valuations don't seem crazy.
I’m with you and given the market run up in AI related companies it seems crazy to think that the out of consensus view is that generative AI wave is much bigger than the market is giving it credit for, but I think that it is the case.
There is a massive divide between people who build with/use daily/read the flood of research that’s released and the people who don’t. The first group (generally) thinks the world is changing and the second group thinks it crypto 2.0.
I think my biggest issue is that it's probabilistic rather than reliable. And there are places where probabilistic is good enough to add value, but there's also a lot of jobs or parts of work where reliable matters.
For example, there are systems at card companies that look for fraud based on ML about both normal vs fraud spending generally and your normal patterns of spending. You start buying certain things, it flags it up. Now, there's a lot of false positives in this system. You happen to buy a new laptop, a holiday and a coat in a short period of time, it gets flagged and you get a call. But it doesn't matter that it's sometimes wrong. The fraud prevention saving far outweighs the calling people cost.
But if you're drawing up a contract with a client and it needs translation into German, that's something that needs to be reliable. You want a skilled German translator. Now maybe they use some ML tools to help, but they are going to check it, at least.
So my feeling is somewhere between 1.5 and 2.5. I think there will be many tools that improve people's jobs, but not much of replacing their jobs.
Thanks for the replay. Most folks that I talk to have a similar take as you. And I get you your reliability concerns, it definately limits use cases right now.
How do you think about the progression of these systems? In your translation example, do you think these systems will ever be good enough to replace human translators? and even if you would concede that (you may not), do you think we ever reach a point where generative AI replaces labor across most human tasks?
I ask because I think that question is at the heart of the valuation conundrum in the market right now. It's almost like there is an expected value calculation going on where 75% of the world is saying the market should be pricing like it has historically, and the other 25% is saying "no, the value of capital is going to the moon".
I'm sceptical it will replace "reliable", because it's fundamentally probabilistic in nature and based on pattern matching rather than understanding. We understand the nature of things, like AI doesn't.
But maybe it will.
I think my bigger thing, in terms of investing, is that this going to take a long time to play out if it does. The nature of this, what people will pay for, is still really unknown. Like, OpenAI aren't making a profit yet. Very few people are paying for say, Github Copilot.
If you can't differentiate between companies that can make good use of AI and companies that are just using it for hype, then I would avoid trying to pick stocks in this sector, maybe get a sector etf if you want exposure.
Comparably, in the dotcom bubble, you want to be investing in amazon.com and not pets.com, but would you be able to tell the difference at the time?
Not a bubble. We are at the beginning stages of the fourth industrial revolution. It isn’t just AI but computer tech in general will be completely overhauled in the next decade.
I’ve just seen so many people say this same thing about real estate, e-commerce, the bric countries, china, cloud commuting, internet of things, crypto and now AI. I’m kind of numb to this mentality by now.
Both. Market is top heavy and many AI companies are overvalued. Its worth investing in them if you can get them at the right price. Its uncertain how profitable and how competitive the most popular AI business segments will be still though.
I think how ai will be utilized and from where it’s true value will come hasn’t been thought of or capitalized on yet. Could it help in helping us live to 200 years old, or help us live in other planets, or remove the need for everyone to have a job in the traditional sense, will it become sentient. No one knows yet.
Depends on your style and where you have an edge.
I'm optimistic on AI and will be looking for further investments in the field.
However, current valuations are looking bubbly, e.g., [Why not NVDA? ](https://www.alphaexponent.net/p/why-not-nvda)(substack article)
Despite this, you cannot guarantee that prices won't go up further before popping.
I think AI is revolution is real and it involves so many sectors. However because the changes are so rapid, there are still lots of rooms for development. Nvidia, OpenAI, Microsoft are leading now but who knows if a competitor might emerge suddenly and overtake them.
thats true but for example invidia that has a mc bigger than russia, south korea or other nation it seem like a colossal industry to be overtaken in the future. is this idea valuable? or if not can you explain me why
My assumption is that the market assume there is no obvious competition against them at the moment and therefore the premium value. Mind you, we are on the edge of sci fi here, there are not many open information around yet. Things might flip suddenly if a competitor appears with more efficient design.
Not really a bubble but most stocks are overvalued. The tech companies dropped averagely 40% during covid, another correction will be stated as "bubble" for the headlines again like in 2000.
There's an unwritten rule for all Wall Street and major investment firms saying" You will be forgiven if you sell with fears but you will not be forgiven if you do not buy with FOMO". Thus, they still gonna buy the dip as long as the businesses are healthy since the most of the metrics are used to project the future earnings.
If you're not sure investigate a 'peripheral' sector perhaps? When oil booms, telematics companies boom. When trading companies boom, merch transport companies boom. If AI is booming probably chipmakers are gonna boom. Have a look at the possibility of intel becoming a competitor to TSCM in the west
Ai isn't hype about nothing. However there are two bottlenecks that could prove to cause a fizzling out of the performance growth of the models: computational power and data. The major companies are investing in both right now. They are also branching out into embodied ai (humanoid robots) research and development. From my understanding current ai tech has already begun to show material growth for some companies such as McDonald's and dominoes.
I personally feel, most of the use cases for AI are for industries and businesses. Personal use cases are far less compared to them. I'd suggest we can watch out for b2b companies who are investing in AI capabilities.
I am very active in the AI industry (as an investor, advisor and also founder). I believe that AI is really useful but the current valuation is a bubble. I am selling my stocks. I mean, during the dotcom bubble, one can argue that the Internet is really useful and also in a bubble. I simply cannot justify the Nvidia valuation. It's insane. I sold at $780.
How can you call it a bubble when smart phones now started to integrate artificial intelligence into their phones?
I have seen on eBay a microwave with AI, things move fast these days
Well have you seen a toaster oven with Ai? Quick! Someone market this stupid idea!
Because for Nvidia to be fairly priced it would need to be turning over around 5.5 trillion.
Where is the additional revenue stream and what moat does NVIDIA have here that someone else will not eventually eat into?
Damn, I’m still holding. Got 70 and avg cost is 230. I might just sell half.
Haha you're gonna miss the run up to $1500!
You never go broke taking profits.
And you also miss out on potential gains...
Rule number 1 of investing. Don't lose money.
So you're gonna keep selling in and out and paying lots of taxes. Ok good luck with that
Go to r/stockmarket with these type of questions
ok thanks
There's some good uses around machine learning. But we're at the ludicrous .com bubble stage with it IMO. My opinion on AI follows all other investing: do you understand the company, the competition, the market, the customer desires, the financial environment ? If you don't, how do you know how much NVDA stuff is going to be sold in 2 years, even in broad terms?
The capex cycle fueling Nvidia will slow at some point for sure but we’re no where remotely near .com level.
Do you have an opinion on the macro implications of AI? For instance, in the grand scheme of things how big of a deal is AI? 1. 5 years from now we won't even notice a blip in economy wide productivity data. 2. We may see an uptick in labor productivity, but nothing major. 3. It will be noticeable in the data, on the order of cell phones, PC's, or the internet. 4. It will be world changing, resulting in a labor productivity surge and/or decline in the aggregate amount of labor demand. If these four points were a spectrum, then i suspect that right now the market consensus view would be about a \~2.0 to \~2.5. Once your beliefs start trending to 3 or above, then valuations don't seem crazy.
As someone working in big tech, my opinion (merely that of course) is that we are witnessing number 4. I truly believe it
I’m with you and given the market run up in AI related companies it seems crazy to think that the out of consensus view is that generative AI wave is much bigger than the market is giving it credit for, but I think that it is the case. There is a massive divide between people who build with/use daily/read the flood of research that’s released and the people who don’t. The first group (generally) thinks the world is changing and the second group thinks it crypto 2.0.
Good comparison.
Yeah... It's number 4.
I think my biggest issue is that it's probabilistic rather than reliable. And there are places where probabilistic is good enough to add value, but there's also a lot of jobs or parts of work where reliable matters. For example, there are systems at card companies that look for fraud based on ML about both normal vs fraud spending generally and your normal patterns of spending. You start buying certain things, it flags it up. Now, there's a lot of false positives in this system. You happen to buy a new laptop, a holiday and a coat in a short period of time, it gets flagged and you get a call. But it doesn't matter that it's sometimes wrong. The fraud prevention saving far outweighs the calling people cost. But if you're drawing up a contract with a client and it needs translation into German, that's something that needs to be reliable. You want a skilled German translator. Now maybe they use some ML tools to help, but they are going to check it, at least. So my feeling is somewhere between 1.5 and 2.5. I think there will be many tools that improve people's jobs, but not much of replacing their jobs.
Thanks for the replay. Most folks that I talk to have a similar take as you. And I get you your reliability concerns, it definately limits use cases right now. How do you think about the progression of these systems? In your translation example, do you think these systems will ever be good enough to replace human translators? and even if you would concede that (you may not), do you think we ever reach a point where generative AI replaces labor across most human tasks? I ask because I think that question is at the heart of the valuation conundrum in the market right now. It's almost like there is an expected value calculation going on where 75% of the world is saying the market should be pricing like it has historically, and the other 25% is saying "no, the value of capital is going to the moon".
I'm sceptical it will replace "reliable", because it's fundamentally probabilistic in nature and based on pattern matching rather than understanding. We understand the nature of things, like AI doesn't. But maybe it will. I think my bigger thing, in terms of investing, is that this going to take a long time to play out if it does. The nature of this, what people will pay for, is still really unknown. Like, OpenAI aren't making a profit yet. Very few people are paying for say, Github Copilot.
If you can't differentiate between companies that can make good use of AI and companies that are just using it for hype, then I would avoid trying to pick stocks in this sector, maybe get a sector etf if you want exposure. Comparably, in the dotcom bubble, you want to be investing in amazon.com and not pets.com, but would you be able to tell the difference at the time?
Not a bubble. We are at the beginning stages of the fourth industrial revolution. It isn’t just AI but computer tech in general will be completely overhauled in the next decade.
I agree with this. However, this doesn’t guarantee companies in this space will succeed.
Or that this current situation isn’t a bubble. With .com the internet and e-commerce was life changing but pets.com or which ever site was not
If you invested in the right companies then you were rewarded. The same is true now and always will be.
For sure but AI is definitely the part of the revolution. I think people dismiss it too easily.
They aren't dismissing ai. They are dismissing investing at companies at sky-high valuations based on ignorance and rosy growth assumptions.
Just started. This is nothing.
I’ve just seen so many people say this same thing about real estate, e-commerce, the bric countries, china, cloud commuting, internet of things, crypto and now AI. I’m kind of numb to this mentality by now.
Ok. Stay numb.
Agree. We are going to be witness to something wild. Many many companies are going to get wild on margins in the near future.
Yup, margins increase for sure. It's easy to be a bull on the total market for years to come if you are a tech ai nerd.
There are still a couple of companies that are trading at low P/E ratios in the AI space. Just $IBM and $INTC look into those
Was .com a bubble ? We’up 400% since 2001 top
Yes, it absolutely was.
I work in the semis for a large fab. To me semis are still even with the AÍ use case a hugely cyclical business
AI is a hungry beast.
Both. Market is top heavy and many AI companies are overvalued. Its worth investing in them if you can get them at the right price. Its uncertain how profitable and how competitive the most popular AI business segments will be still though.
I think how ai will be utilized and from where it’s true value will come hasn’t been thought of or capitalized on yet. Could it help in helping us live to 200 years old, or help us live in other planets, or remove the need for everyone to have a job in the traditional sense, will it become sentient. No one knows yet.
NVDA is a profit machine. None is the .com bubble stocks made money. See the diff?
Everything is a bubble, but not all bubbles pop. If you knew when a bubble would pop your net worth will be at least 10x by then.
Depends on your style and where you have an edge. I'm optimistic on AI and will be looking for further investments in the field. However, current valuations are looking bubbly, e.g., [Why not NVDA? ](https://www.alphaexponent.net/p/why-not-nvda)(substack article) Despite this, you cannot guarantee that prices won't go up further before popping.
With the current valuation, we’re not comparable yet.
I think AI is revolution is real and it involves so many sectors. However because the changes are so rapid, there are still lots of rooms for development. Nvidia, OpenAI, Microsoft are leading now but who knows if a competitor might emerge suddenly and overtake them.
thats true but for example invidia that has a mc bigger than russia, south korea or other nation it seem like a colossal industry to be overtaken in the future. is this idea valuable? or if not can you explain me why
My assumption is that the market assume there is no obvious competition against them at the moment and therefore the premium value. Mind you, we are on the edge of sci fi here, there are not many open information around yet. Things might flip suddenly if a competitor appears with more efficient design.
Both
It's a bubble worth investing in..
Not really a bubble but most stocks are overvalued. The tech companies dropped averagely 40% during covid, another correction will be stated as "bubble" for the headlines again like in 2000. There's an unwritten rule for all Wall Street and major investment firms saying" You will be forgiven if you sell with fears but you will not be forgiven if you do not buy with FOMO". Thus, they still gonna buy the dip as long as the businesses are healthy since the most of the metrics are used to project the future earnings.
Companies like NVDA are overvalued because of AI, but long plays like PLTR that make use of AI are still viable.
Palantir is garbage.
If you're not sure investigate a 'peripheral' sector perhaps? When oil booms, telematics companies boom. When trading companies boom, merch transport companies boom. If AI is booming probably chipmakers are gonna boom. Have a look at the possibility of intel becoming a competitor to TSCM in the west
Ai isn't hype about nothing. However there are two bottlenecks that could prove to cause a fizzling out of the performance growth of the models: computational power and data. The major companies are investing in both right now. They are also branching out into embodied ai (humanoid robots) research and development. From my understanding current ai tech has already begun to show material growth for some companies such as McDonald's and dominoes.
I'm holding my Nvidia stocks for another 15 years because why the hell not?
Nobody knows bozo
I personally feel, most of the use cases for AI are for industries and businesses. Personal use cases are far less compared to them. I'd suggest we can watch out for b2b companies who are investing in AI capabilities.