Colin’s Note: All week, we’ve been focusing on innovation in artificial intelligence… spotlighting some of the most game-changing companies and their particularly pioneering applications of AI.
In this issue, we’re keeping the theme rolling but taking a different approach. Of course, we want to put the biggest visionaries in the AI sector on your radar. But it’s just as important to us that you know when what you’re looking at isn’t an AI innovator… but an AI “imitator.”
Today, we’re discussing the financial news that’s had Wall Street buzzing all week – Reddit’s IPO.
The social platform has been around for more than 20 years and has more than 330 million active users… it’s the internet’s biggest discussion forum… But what it isn’t – despite what the Wall Street hype guys are saying – is an AI innovator.
We get into it in today’s video. Just click below to watch, or, per usual, my team and I have provided a transcript if you prefer to read it.
Bleeding Edge subscribers, hopefully, guys are doing well. Happy Friday. My name is Colin Tedards.
All week, we’ve been talking about innovation in the artificial intelligence (AI) sector. On Monday, we talked about how AI agents will leverage the usefulness of large language models (LLMs) like ChatGPT, Google’s Gemini, Anthropic’s Claude, and others.
They’re going to leverage these and go from just being a tool… to performing more like a personal assistant and completing tasks automatically.
Likewise, on Wednesday, we discuss how these large language models and the world of robotics are going to converge. For more than a decade, the world of robotics has been waiting for a breakthrough that will create a new trillion-dollar industry… One where we move away from just these one-dimensional robot vacuum cleaners or lawnmowers and drones. And I believe we’re on the verge of that breakthrough in the robotics industry.
We’ve talked about it a lot here in the newsletter. With all these exciting aspects of AI and innovation, it’s really easy for investors to get lost… and it gets more difficult to distinguish between actual innovation and what I call “imitation.”
This week we got a glimpse of a company making headlines around AI, but not for the benefit of investors… And that company is Reddit.
If you watched any financial news of the past week, you couldn’t have missed Wall Street’s latest IPO craze. After nearly two decades of existence, the online discussion forum was finally able to go public.
And, look, the timing couldn’t have been better. The stock market is at an all-time high… and the hype around AI is really strong right now. There’s also been kind of a lack of new IPO stocks to reach the market, especially for companies as well-known and as public-facing as Reddit.
But the IPO was a typical Wall Street heist. It was a robbery in broad daylight.
That’s because Reddit is the same kind of stock that retail investors poured money into during the pandemic stimulus-fueled markets just a couple of years ago… only to see their investment dollars get washed away after all the hype wore off.
In 20 years, Reddit has never generated a profit. If Reddit was a small business run by you and me, we would’ve had our going-out-of-business sale long ago.
But the combination of moderators and posters – the ones who run the site and post on it for free – and venture capital is what has kept the site going all these years. And now Wall Street bankers did what they do best.
They bumped an unprofitable company onto retail investors promising the hype of AI and profits to come.
The truth is… Reddit isn’t an AI company.
The website is simply a relic of yesteryear before social media kind of killed off all the allure of posting on online forums. Sure, Reddit will be able to sell access to the content on its site to AI companies like Google or Microsoft… But it’ll be Google that creates innovative new technology that will drive new sources of revenue and profits for investors.
Yes, the data is an important ingredient for AI. In fact, we believe data is the most crucial aspect of creating a strong AI product.
But what a company does with its data is paramount. It’s everything.
Get this… Reddit is simply trading its most valuable asset for dollars. I probably don’t need to remind anyone watching this of the fact that the purchasing power of the U.S. dollar has steadily been eroding for decades.
In the age of AI, you should be converting your data into goods and services, not dollars. That’s what the smart companies are doing.
Selling user data to an AI company isn’t innovative. In fact, it’s lazy.
Over the next several years, Reddit executives are going to earn healthy salaries and stock options that they’ll likely quickly dispose of. They’ll sit back in their offices and watch the users and moderators post to the site for free.
Meanwhile, Google’s going to trade some dollars it earns far too easily every day for Reddit’s most prized asset.
I know I said earlier it was Wall Street committing a robbery in broad daylight, but it’s Google driving the getaway car.
In technology, folks, you have innovators… and you have imitators. Being able to distinguish between the two is critical, especially in the age of AI.
That was The Bleeding Edge for today. I will see you again next week. Have a great weekend.