(Bloomberg) – A $480 billion chipmaker whose processors are used for complex computing tasks. A digital media company looking to exploit emerging technologies for content. A small software company whose shares traded below $1 for most of December.
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These are some of the disparate companies whose stocks are benefiting from the euphoria swirling around artificial intelligence – the latest buzzword to plunge traders into speculative froth – and evoking memories of past bubbles.
The meteoric rallies at companies that have AI in their name remind veteran market professionals of previous crazes like the one in 2017 sparked by blockchain technology. During this period, there was a momentum of exposure – from both companies and traders – to see the frenzy fizzle and stock market gains fade away. While AI is undoubtedly a huge growth opportunity and a topic investors should take seriously, buyers should beware, said Jonestrading’s Michael O’Rourke.
“We’ve had tons of episodes like this before where one group gets hot and everyone piles into everything related to it,” said O’Rourke, chief market strategist of the company, in an interview. “As for anyone betting on names and tickers, it will be a wild ride for them. If you are speculating, you are not investing.
The massive popularity of OpenAI’s ChatGPT tool has generated a lot of excitement about potential AI use cases since its debut late last year. Microsoft Corp. is investing $10 billion in OpenAI, which needs funding and cloud computing power to run increasingly complex models. Microsoft said it plans to use OpenAI’s models in current and future products.
Nvidia Corp., the semiconductor maker, has been touted by Wall Street analysts as a beneficiary of greater investment in AI as it dominates the market for graphics chips that provide the computing power behind graphics. software models. Its shares rose 34% in January, Nvidia’s best month in nearly six years.
The arguments behind the rallies of some other stocks are more tenuous. BigBear.ai Holdings Inc., which uses artificial intelligence to help customers analyze data, saw its shares rise fivefold this month. BuzzFeed Inc., the media company that has cut costs amid a digital advertising slump, jumped more than 300% in two days last week after its CEO pledged to incorporate inspired content of AI in its “core business”.
C3.ai Inc., another software maker that includes Raytheon Technologies Corp. and Baker Hughes Co. among its customers, saw a record 77% last month.
Baidu Inc., China’s largest search engine company, is also jumping into the fray. The company plans to roll out a chatbot service similar to ChatGPT, according to a person familiar with the matter, although news this week failed to lift the stock price.
Until the bubble bursts, O’Rourke said he wouldn’t be surprised to see companies add AI to their names or an increase in secondary stock offerings as executives seek to capitalize on the ‘euphoria.
“It’s still just the beginning,” he said. “For all the names and tickers moving now, there will probably be three times as many in a month.”
Technical table of the day
Recent investor optimism toward tech stocks has helped propel the Nasdaq 100 index above its 200-day moving average. It is a key measure of long-term momentum and the high-tech gauge had traded there for 203 straight sessions, making it the longest such streak in around two decades. The index is up nearly 11% this year, but Wednesday’s Federal Reserve rate and a series of Big Tech earnings will show if this rally has legs.
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Advanced Micro Devices Inc., the second-largest maker of computer processors, gave a better-than-expected sales forecast for the first quarter, as gains in the lucrative server market helped offset slumping demand for PC chips.
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SK Hynix Inc. is sticking to its plan to halve capital spending in 2023 after reporting its biggest ever quarterly loss, hammered by a historic chip industry slump.
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OpenAI, which launched viral chatbot ChatGPT last year, has unveiled a tool to help show if text was written by an artificial intelligence program and impersonated human.
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–With help from Subrat Patnaik and Matt Turner.
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