AI Insights

If AI does the equivalent of what older day tech companies did post-1995, consider where the growth is most likely to come from.

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Intrigue! Sour interpersonal relationships! Backstabbing! A coup! A mutiny! An existential threat to humanity! No, this month’s commentary is not a brainstorming session to create a blockbuster movie script. Instead, it hopes to provide a different reflection on the recent boardroom fiasco at OpenAI.

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October has not failed to live up to its reputation as a volatile month for the US stock market. For those seeking an explanation, the fall is being blamed on the rise of US 10-year treasury yields, which crossed 5% for the first time since July 2007. With risk-free investment around 5%, the shine is somewhat taken off risky US equity investments. In addition, the prospect of higher-for-longer borrowing costs does not bode well for US companies and by extension the stock market.

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Based on conversations we had recently with a range of sophisticated investors, there seems to be a curiosity as to whether employing AI within an investment strategy could provide their organizations with a truly alternative, alternative investment.

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Sophisticated investors are (hopefully) already reaping the benefits of the AI wave, by picking the winners among the tech stocks that have had an AI-driven surge in value since the beginning of this year. It is rather more difficult, however, to take the next step searching for AI opportunities among money managers deploying the technology. There is a very good reason for this.

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Which alternative investments diversify your portfolio?

Investors agree that there are benefits in having diversification within a portfolio. Deciding how diversification should be achieved and to what extent to allow diversification allocations to have a dilutionary effect on a portfolio’s core investment allocation are among the most challenging choices investors have to make.

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As investors are finding, there is a distinct lack of consensus on what the latter half of 2023 may bring. Expert opinion on where the S&P 500 will end the year include a pessimistic Morgan Stanley estimate of 3700 and a conservative Goldman Sachs estimate of 4500 (-14% to +3.5% from end-June levels, respectively).

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From Employment to Stocks and Sectors

A considerable amount of focus is being placed on the potential impact that AI could have on the future of the white-collar employment landscape. From writing code to writing reports, jobs that are the preserve of a very narrow definition of “intellect” are potentially under severe threat. This is because AI now offers the possibilities of doing these tasks faster, doing them as well as a human counterpart could, and possibly better (in that there is the potential for less error).

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Have AI Data Wars Begun?

Did Elon Musk fire the first salvo of an AI data usage war? We are referring to his April 19, 2023, post “They trained illegally using Twitter data. Lawsuit time.” in relation to Microsoft’s use of Twitter data to train its AI model.

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The Good, the Bad, and the Confusing

March has certainly been a turbulent month for US markets for various reasons, with the most pointed condensing around the fears of a banking crisis following the demise of SVB and Signature Bank. The VIX index crossed 25 for the first time in 2023, indicating how uncertainty has been ramping up. Or was it? The S&P 500 began the month at 3970.15 and it closed at 3971.27 at the time of writing on March 28. A 0.03% change is not particularly noteworthy!

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