It has been a torrid 18 months for investors who bet on tech. Softbank, a Japanese investment firm that epitomised the 2010s boom in venture-capital funding for companies with rapid-growth ambitions, is still smarting from the shift to a world of higher interest rates and lower corporate valuations. But there is one area in which the firm, run by Son Masayoshi, its charismatic founder, wants to peek above the parapet: investments in artificial intelligence (ai).
The advances of generative-ai platforms, such as Chatgpt, have left just about every investor discussing what to make of the incipient industry, and which firms it might upturn. Mr Son sees parallels with the early period of the internet. Generative ai could provide a new pipeline of initial public offerings—and the foundation for the next generation of mega-cap tech firms.
Investors face two questions. The first is which frontier technologies will make market leaders a fortune. That is difficult enough. The second, establishing whether the value will accrue to upstarts backed by venture capital or existing technology giants, is at least as tricky. Nobody knows yet if it is better to have the best chatbot or plenty of customers; having a head start in a whizzy new tech is not the same as being able to make money from it. Indeed, lots of the value of revolutionary innovation is often captured by existing giants.
Alphabet, Amazon and Meta are three of the seven largest listed companies in America, worth a combined $3.3trn. They were founded between 1994 and 2004, emerging at a time when internet technology was new and people were spending an increasing amount of time online. Alibaba, a Chinese e-commerce giant, is another similar example (Softbank’s early $20m stake in the company helped cement Mr Son’s reputation as an investor). Spotting tech trends, and developing the best platforms, generated a gargantuan amount of value for early and even not-so-early investors. Legacy firms struggled to jump on the bandwagon.
Will the story be the same this time around? The insights of Clayton Christensen, a management guru who pioneered a theory of innovation just as the internet giants were bursting onto the scene in the 1990s, can provide a useful guide. Christensen noted that smaller firms often gain traction in low-end markets and entirely new ones, which the largest incumbents eschew. The incumbents focus on deploying new technology for their existing customers and lines of business. They are not incompetent or ignorant of technological progress, but they follow the seemingly correct path from a profit-maximising perspective—until it is too late and they are fatally undermined.
Investors like Mr Son, excited about the future of startups that focus on ai, are implicitly presuming that a period of disruptive innovation is under way. But most of the recent excitement about generative-ai platforms has focused on their potential as a new technology to be deployed, not as companies which could open up brand new markets. And in the case of other recent technological innovations, incumbents have won the day. Elad Gil, a venture capitalist, has noted that the value of previous advances in machine learning, the broader category of which generative ai is a part, have accrued almost entirely to incumbents. The early internet startups have benefited, as have Microsoft and chip firms like nvidia and Micron. The earlier stages of machine learning produced no listed firms that might be considered the Amazon or Google of their niche.
Christensen’s insights make clear that revolutionary innovation does not always end up being revolutionary in mere business terms. Yet existing tech companies are now spending enormous sums on ai, suggesting they should be well-placed if the tech does turn out to be revolutionary. It is possible that an investment in a broad index fund tracking existing listed tech firms will end up outperfoming the equivalent investment in private, strictly ai-focused startups.
Theories about why innovation is sometimes disruptive and sometimes not are more often discussed by students of business and management than stockpickers. But the difference between the two possibilities is crucial in assessing whether the next generation of listed tech companies with market capitalisations in the hundreds of billions of dollars is to be found among private ai firms. As things stand, it looks more likely that the market value of the technology will end up as a new string to the bow of already giant tech firms.
© 2023 The Economist Newspaper Limited. All rights reserved.
From The Economist, published under licence. The original content can be found on https://www.economist.com/finance-and-economics/2023/05/17/how-to-invest-in-artificial-intelligence
With the help of the 13-F filing, we have highlighted some smart stock-selection techniques and the most-appropriate ETFs that fit in each category for investors seeking to bet like billionaires.
The assumption among most financial prognosticators is that a recession is most likely on the way, and one prominent name agrees it’s all but inevitable. Legendary investor Paul Tudor Jones sees a recession coming and even has an idea of when it will hit. The Tudor Investment Corp founder and billionaire expects a recession will come into play this fall, mainly as a result of the surge in debt and asset prices in recent years. Such activities are usually followed by an economic downturn. “Histor
Recently, Zacks.com users have been paying close attention to Palantir Technologies Inc. (PLTR). This makes it worthwhile to examine what the stock has in store.
By increasing borrowing costs and reducing liquidity, interest rate hikes have the potential to cool asset bubbles. But despite the Federal Reserve’s aggressive rate hikes, billionaire investor Stanley Druckenmiller doesn’t believe the bubble has dissipated. “I’m sitting here staring in the face at the biggest and probably the broadest asset bubble — forget that I’ve ever seen, but that I’ve ever studied,” he said at the 2023 Sohn Investment Conference. “It went on for 10 or 11 years and then it
GE has gained 55% so far this year. The stock is setting up for a big move with a whopping 93% earnings estimate for 2024.
(Bloomberg) — The patent that’s given Vanguard Group an edge over competitors for the past 20 years — and helped its clients pull in more than $100 billion worth of additional investment gains — expired today.
A high rise office building in San Francisco's financial district is being sold for significantly lower than what it had been valued at a few years ago, the San Francisco Business Times reported.
These are the stocks moving in after-hours on Wednesday, May 17, 2023.
Greg Becker acknowledged that regulators had pointed out flaws in SVB's balance sheet, but said that he was in the process of working with regulators when the bank run occurred.
As unique leaders in their space, strong quarterly results on Thursday could give a nice boost to these stocks and they are viable long-term investments worth holding onto at the moment.
(Bloomberg) — The yuan slid past the key level of 7 per dollar for the first time this year in a further sign the recovery of the world’s second-largest economy from its Covid restrictions is grinding to a halt.Most Read from BloombergHere’s How Much Wealth You Need to Join the Richest 1% GloballyDebt-Limit Talks to Intensify as Biden Set to Depart for JapanJPMorgan Asset Says Markets Are Right to Bet on US Rate CutsMercedes Sets Out to Make Sexy Vans With Yacht-Like InteriorsThe currency weake
Unless you're extremely rich or poor, you probably think of yourself as being part of the "middle class." As you're probably aware, "middle class" is an income level that describes people whose annual income is directly in the middle 50% … Continue reading → The post What Is Middle Class Income in the U.S.? appeared first on SmartAsset Blog.
The stocks our screen found are cheap, relative to highfliers like Eli Lilly, and many are cheap for a reason.
A pair of tech stocks are seeing growth in the triple digits this year. Meta Platforms (META) is up 102% this year, on pace for its best year since 2013, when it rose 105%, according to Dow Jones Market Data.
(Reuters) -Cisco Systems Inc said on Wednesday a large backlog of products due to supply chain constraints has hit demand for new orders from customers, sending the company's shares down 4% in extended trading. Cisco's product orders fell 23% in the third quarter, even as the maker of routers, security services and software products reported a quarterly profit that beat estimates, helped by its aggressive steps to resolve supply chain bottlenecks. But the backlog, combined with "macroeconomic conditions", hit demand for new products, company executives said on a post-earnings conference call.
Saving $1 million (or more) for retirement is a great goal to have. Putting that much aside could make it easier to live your preferred lifestyle when you retire, without having to worry about running short of money. However, not … Continue reading → The post What Percentage of Retirees Have a Million Dollars? appeared first on SmartAsset Blog.
ONEOK (OKE) signs a merger agreement with Magellan. This pact will open up Magellan's refined products and crude oil transportation business to ONEOK.
Charles Schwab said it intends to use the net proceeds for "general corporate purposes", and did not disclose the pricing for the offering in its filing with the U.S. Securities and Exchange Commission. BofA Securities, Citigroup, Credit Suisse, Goldman Sachs & Co. LLC, J.P. Morgan and Wells Fargo Securities are the joint book-running managers for the offering.
Lithium stocks are back on the rise as the price of the battery metal rebounds. SQM earnings are due out late Wednesday.
The market rally made bullish moves on growing optimism for a debt-ceiling deal. ServiceNow and Taiwan Semi led stocks flashing buy signals. Here's what investors should do now.
Leave a Reply
You must be logged in to post a comment.