AI Confusions & Trend Reversal
New Year, New Markets... PARADIGM SHIFT WARNING
It’s not a new year no.
But it’s the start of a new season — and it seems everyone is back from their holidays and no longer going with this AI craze anymore.
This piece will be brief, to the point, and packing a lot of punch… BRACE.
The Big Picture
If you haven’t been living under a rock — you know markets are in some sort of AI HYPE CYCLE that has “created” trillions in stock market value. But not everyone has benefitted equally. The Russel 2000 is where it was in February 2021.
[Charts attached at the end of the piece]
The Four Groups of the AIpocalypse… 🏇
I categorised the key players and beneficiaries of this AI cycle into four groups.
Companies in the GPU, Semiconductor, Data Center value chain. Think Nvidia, AMD, SMCI, TSMC etc.
Companies that buy from Group 1 companies to build something else and sell it further down. Think Big Cloud (Microsoft, Google, Amazon) and others.
Those that use AI technology (i.e. from Group 2) to power their product. Think Microsoft CoPilot and other AI productivity tools, Social Media, Search Engine, Online Retail, Smartphones like iPhone etc. Could be anything from simple to complex — AI Chatbots are in this category.
VCs, SWFs, Tesla, Parachutists etc. Those that are looking to throw resources in the AI race, hoping to make a quick buck — either by flipping their investments at higher prices or benefitting from an increase in their stock valuations.