AI buzz has sent several major tech stocks soaring, but will they live up to the hype? Seema Shah, Chief Global Strategist, Principal Asset Management, and Brian Frank, CIO and Frank Value Fund Portfolio Manager, Frank Funds, on the Rally of AI Technology and Current Topics Analyze whether is overemphasized.
video transcript
Diane King Hall: We know that the hype about artificial intelligence has dominated the market so far this year. How much should you buy in this bull market? We also want to bring back Principal Asset Management and Global Strategist Seema Shah. And of course, Brian Frank, his CIO and Portfolio Manager at The Frank Fund, is at our table.
So let’s talk about the initial reaction to AMD first. Seema, I would love to hear your reaction to the news about the new chip. And could it be a rival to NVIDIA?
Seema Shah: I think the important thing here is that even during earnings season, companies that mentioned the word AI had a very positive response in the market.
Today, we strongly believe in a broader, long-term view of technology. And, of course, AI is at the heart of it. But looking at the broader market reaction over the last few months, I think it’s probably a little frothy. Investors also have high expectations. Perhaps some of those expectations will not be met in the coming months.
I think you can see from the bubbling that it’s receding a little. But certainly, at least many of these companies are leveraging AI within their capabilities and if they stick with it, the long-term trajectory is clear. Indeed, it looks like a very positive path for them.
Brad Smith: Brian, one of my respected colleagues here at Yahoo Finance, drinks cold bubbly every day. and i see it. And I think most of it is just foam. And the rest is matter. So I now think about the bubble phase that we feel like we are in. You’re getting a lot of stuff there, oh, that looks interesting. And it looks interesting. But where does the actual essence come into play? And what does the timeline look like now for some of these AI companies?
Brian Frank: Let’s put a number in that bubble.
Brad Smith: of course.
Brian Frank: And I agree 100%. So AMD’s CEO said the market today is $30 billion for him. In five years it will be a $150 billion market. How much did NVIDIA add to its market cap last month? And that would have earned him 80% of the market.
So if AMD can put a brake on that, it will probably add a lot more market cap than the size of the AI market as a whole. Definitely exciting. It’s definitely a technological breakthrough. But with the advent of the Internet, Microsoft Office, and Windows, the same thing happened to Microsoft in the late 1990s. Microsoft dominated the market from his 2000 to 2010, when he doubled his operating profit. But there were too many bubbles, and the stock fell 40% over a decade.
Diane King Hall: Seema, I want to hear from you. As such, regulators are now starting to turn their attention to AI, especially generative AI. Congress held its first meeting this week. No, the senators also had their first meeting on it this week. Who will benefit from increased regulatory oversight, or who will lose from increased regulatory oversight of generative AI?
Seema Shah: That’s a serious concern. I think this has been a long-standing concern for tech investors, and we’re just waiting to see how regulators respond to this ever-advancing technology. Now, from our perspective, things don’t happen overnight. You can see that’s the direction Congress is headed. And for investors who have such high hopes for what technology will bring, there is concern that regulation will set back some of that. And there could be disappointment, which, unfortunately, would depress not only the technology sector, but the broader market.
And the whole geopolitical relationship between China and the United States, centered around technology, should also be considered. So it’s not just a simple path. I think there are probably a lot of headwinds that investors really need to be concerned about and pay attention to as they begin to consider investing in these stocks.
Brad Smith: And when you look at AI stocks, some stocks are benefiting from just being mentioned. Some of them are benefiting from just having AI in their name. And I’m looking at you, C3 AI. But after all, if you think about where the different pillars of artificial intelligence are, especially generative artificial intelligence, because that’s the latest wave of the current AI boom. If the application has pillars, is the language learning model its own pillar, or is the chip its own pillar, the chip is currently winning.
So, Seema, where will the next wave from your perspective take shape?
Seema Shah: I think there are many. I think the chip perspective is the most important at the moment. But unfortunately, it’s actually affecting the geopolitical relationship between the US and China that we’re so concerned about.
But overall, if technology can move in that direction and realize its potential, it will bring tremendous productivity gains to the U.S. economy, and indeed to the global economy. I think.
So, we think any technology that can profit or ride on some of these AI stocks will do well. For an investor, at a price like this, certainly for a company like his NVIDIA, which I mentioned earlier, it’s probably not the best time to get involved, I have to say. But there are other mechanisms in the broader market that can tap into the technology of the AI boom.
So for investors, I think it’s not just a matter of looking at technology, but looking at the broader conglomerate and seeing what other opportunities there are.
Brad Smith: Brian, that’s a really good point. How likely is it that AI will have some significant impact on the employment landscape? Is the total number of jobs out there more than we already know? But how will those roles change in the future? What does this also mean in terms of expected productivity across the employment landscape?
Brian Frank: In fact, I’m optimistic about it. Because we hear that various industries are applying AI to their jobs. And it actually makes people more efficient. And it doesn’t necessarily put them out of work. It really just makes them more productive. Therefore, I am optimistic that AI will actually create more jobs and improve the quality of jobs. So it can be great for everyone.
