Bahadir Eroglu
Having attended the Fed conference in Richmond as mentioned in my last article, I would like to gather some insights on the subject of artificial intelligence (AI) as it had an amazing surge yesterday and continues its trend today. I continue to be blown away by sentiment over the surge in Nvidia (NVDA) and NASDAQ valuations. And for the record, I don’t usually write in depth in this area, so forgive the omissions, but listen to the context.
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Talking AI, LLMs (Concept Elemental)
In trying to grapple with the prospects for AI, a summary from the Bloomberg newsletter summed it up:
Artificial intelligence prompted Citigroup strategists to upgrade technology stocks to “overweight”. They upgraded US stocks to neutral overall on anticipation of AI, the expected end of Fed rate hikes and robust American economic growth versus China and Europe.
US stocks are fueled by the bet on AI as they are heavily invested in tech mega-caps.
The Nasdaq 100 index is up 27%, one of the world’s best performances, and is poised for its best start to the year since 1998.
Strategists have also reduced European equities to underweight and Chinese equities to neutral.
The implications of AI and large language models (LLMs) like ChatGPT are quite far-reaching. One is that innovation and productivity could increase by 10%, 20%, or 50% among “cognitive workers.” There are implications for monetary policy, inflation, natural interest rates, etc., according to expert Anton Korinek, who spoke at the conference. It is seen as a positive supply shock. LLMs are the leading category in this field.
Basically, this is exactly the news the tech industry was hoping for after some companies’ valuations plummeted 30%. It’s creative destruction par excellence, just the creative part, ie new beginnings, with some endings. One sometimes hears in the economics literature that productivity growth is slowing down. This is a potential reversal of this trend and a positive trend when so many inflationary forces are at work, which I am discussing (here). The advantages of AI in the energy sector are also in the foreground. I can already imagine many applications.
Tech Rally (Bloomberg)
Many technology companies benefit from the attention. Few stayed behind. As I discussed in the article Innovation Economics: Tectonic Shifts and Use Cases? Yesterday, the trend of reindustrialization will also get the tailwind of developments in AI. The supply chains, which are being overhauled worldwide, are equally affected in many ways.
Higher added value? (WSJ)
Nvidia dominates (Seeking Alpha)
Check out some thoughts on the next-gen AI era.
