Colin’s Note: It’s been a minute since we’ve taken a step back to look more broadly at the artificial intelligence industry’s progress…
So, in today’s video, I’ll be doing a quick dive into the state of AI today…
We’ll look at how the narrative surrounding the tech has shifted over the past 12 months or so since AI began to take off in earnest across the tech industry… And started catching the attention of some major players in the sector and beyond.
The naysayers proclaiming AI to be a “threat to humanity” have grown quieter… And it’s harder now for the big players in AI to keep the wealth-creating potential of this powerful tech under wraps… And as we see more industries and businesses hopping on the AI megatrend, we’ll begin to shift into the final phase of the AI rollout…
Where we’ll see AI everywhere.
It’s all in today’s video. Just click below to watch… Or read on for the transcript.
Hello, viewers, subscribers, and readers. Today, we are going to have a State of the Union for the artificial intelligence (“AI”) industry.
It’s been about a year since AI has taken over the imagination of not only the tech community… but the investing community as well.
If you look at some of the best-performing stocks and sectors of the past 12 months, most of them are either AI-focused or at least related to artificial intelligence. It’s become a very important part of both the tech and tech investing communities.
Now, I want to rewind. Let’s look back to about a year ago when AI started taking off. A lot of the discussion and headlines around AI – particularly on the mainstream news websites – centered on AI being a "threat to humanity.”
It was that… or that AI was going to take everybody’s jobs. Then we’d have to resort to universal basic income because computers were going to do virtually everything. There was going to be no need on Earth for humans.
A lot of this talk ended up being simply overblown. As we learned and saw over the last year, AI was far more of a job enabler. It’s helped people and companies become more productive rather than taking jobs away.
Now, those headlines haven’t gone away. That’s largely because people in the AI community – like Elon Musk and Sam Altman of OpenAI – stoked those fears. Whether it was on the social media sites that they own… Or if they’d go to Congress and stoke the fears there as well.
And the reason why – and we correctly identified this here at Brownstone Research – was the big AI players knew the value and the wealth potential of AI… So they were trying to do something called “regulatory capture.”
They were trying to get Washington to create licenses and regulations around AI. That way, companies like Microsoft, Google, Apple… and powerful people like Elon Musk… would have full control over this powerful new technology.
But one thing is still the same in Washington… And that’s how Washington and lawmakers are very slow to act. Particularly when you have a divided Congress… and particularly when you have lawmakers approaching a very important election year.
There’s very much an unwillingness to do things. And it’s given the AI industry the freedom and willingness to invest and expand. You see both large and small companies compete in this space, and I expect that to continue. That’s a very healthy ecosystem as it relates to the AI industry.
Now, we’ve also talked extensively about how the AI rollout will happen in three phases. First, you’ll have hardware… then you’ll have software… and eventually, you’ll look around and AI is going to be everywhere.
It’s very similar to the internet. Initially, you needed hardware. You needed modems, the PCs in everybody’s house, the fiber optic cable, Wi-Fi technology, and, eventually, high-speed internet. You needed all that hardware investment to enable software to start to take over.
Look at the software that’s been produced since the internet age came around… things like Google, Netflix, and Amazon. And then came the final phase… Now, we look around and the internet is everywhere in our lives. You’re consuming this content via the internet in some way or another.
The same thing is going to happen in the AI industry. We’re not even a year out from Nvidia shocking the world with their Q-tube guidance. They saw demand in sales and forward demand accelerate for their hardware chips.
But we correctly identified here on the channel that the AI hardware was going to center particularly around three companies… And that there would be a lot of other pretenders in the hardware space.
Nvidia would take the lead. It’s been investing and excelling in the AI hardware space. We knew there would be other companies though – like Broadcom – that have a lot of intellectual property, technologies, and great partners. They’d also do well.
And then there’s Advanced Micro Devices (AMD), the upstart in the space. It would put pressure on competitors in the semiconductor space because it can create comparable products – at least on a performance basis – to the primary players like Nvidia.
And companies like Intel were more or less going to fall by the wayside because they simply don’t know how to execute. That was the case for all of 2023. And I don’t expect much to change in 2024.
On the software side, the major tech giants who have dominated software for the past several decades – like Microsoft – are certainly going to have a head start. They already have the software, expertise, and customers to continue to do that.
Now, on the large language model (LLM) side, there’s still a battle between closed-sourced language models. The closed-source or proprietary language model is like what you have going on over at ChatGPT… or an even better example, it’s like what you have going on over at Google. Those are language models that are owned and more or less controlled by the large tech giant.
Now, they have application programming interfaces (APIs) – software that lets applications communicate with each other – that they’ve opened up to other applications. But at the end of the day, that language model is completely walled and closed off by the large tech giant.
Then, interestingly, you have a company like Meta. I think it’s just trying to “poke the bear” by creating LLMs that cost tens of millions of dollars to develop. Meta creates these LLMs and then releases them to the public for free. And it allows any type of use and modification to the language model.
I think this was initially done by accident. But Meta stumbled into a way to up its competitive advantage over competitors like Google and Microsoft. This gives Meta an interesting position in the space of open-source LLMs, and companies are actually using these open-source LLMs.
Most notably, this week we saw Nvidia is using Meta’s open-source LLMs to develop next-generation computer chips and train new, upcoming, and incoming employees in a better way. It’s come full circle for Nvidia. It’s making the chips that enable the software… and now it’s using the software to train and manufacture its products. It’s amazing.
Now, what we’re looking for in 2024 is the moment when AI starts to go everywhere.
The everywhere moment is when AI goes beyond the tech community… and beyond even the corporate community that’s looking for every advantage it possibly can to enable its employees to work faster, better, and cheaper.
The everywhere moment is like when your grandma buys an iPhone… or when your six-year-old is connecting to the internet at school. We’re still probably a ways away from AI infiltrating the school system in a major way… But there will be more sectors getting on board with AI.
There’s regulatory stuff, there’s compliance, and there’s privacy. There are a couple of different layers that some industries need to get through. But there are a few that will likely get on board in a major way later this year.
You’re looking at sectors like financial technology, healthcare, and insurance. They’re going to integrate AI in a major way to help them run their business and see the benefits that a lot of these tech companies have seen by integrating AI into their business.
Folks, the state of the AI union is not only strong, but it’s still getting stronger. The fears about AI being a “threat to humanity” have finally calmed down. The threat of AI taking every person’s job and universal basic income being ushered in, the threat of that has also calmed down.
People are starting to look and see AI for what it is… a tool that helps people do things more efficiently and helps businesses run more efficiently. And after coming off some of the highest and steepest inflation numbers that this country has ever seen, the greatest, biggest, and best way to tamp down inflation is increasing productivity in businesses and industries.
And that’s exactly what we’re seeing, and that’s exactly what we’re going to see going forward. There will be a lot of news in the AI industry over the next year. I look forward to covering it and bringing it to you here on the channel and in the newsletter.
My name’s Colin Tedards, and I’ll be back on Friday with more from The Bleeding Edge. Until then, I hope you all have a wonderful day, and I’ll see you again soon.