ChatGPT Unleashes Stock Trader Stampede for Everything AI
The recent frenzy surrounding artificial intelligence (AI) has sparked a wave of excitement among stock traders, with many companies experiencing significant price increases in recent weeks. However, veteran market professionals are warning that this latest bubble may be reminiscent of previous crazes, such as the one triggered by blockchain technology in 2017.
A Brief History of AI-Mania
In 2017, the emergence of blockchain technology sparked a wave of interest among investors, with many companies experiencing significant price increases. However, as the hype surrounding blockchain began to fade, so did the stock gains of those who had invested heavily in it. This pattern is being repeated today, with the massive popularity of OpenAI LLC’s ChatGPT tool generating excitement about the potential use cases for AI.
The Rise of AI-Related Stocks
Nvidia Corp., a US$480-billion chipmaker whose processors are used for complex computing tasks, has been touted by Wall Street analysts as a beneficiary of greater investment in AI. Its shares rallied 34% in January, Nvidia’s best month in almost six years. Other companies, such as BigBear.ai Holdings Inc., which uses artificial intelligence to help customers analyze data, have also seen their shares soar.
The Case for Caution
While AI is undoubtedly a huge growth opportunity and a theme that investors should take seriously, buyers should beware, said Michael O’Rourke of Jonestrading Institutional Services LLC. "We’ve had tons of episodes like this before where a group becomes hot and everyone just piles into everything related to it," he warned. "As far as everyone who’s betting on names and tickers, it will be a wild ride."
The Bubble Will Eventually Burst
Until the bubble bursts, O’Rourke said he wouldn’t be surprised to see companies adding AI to their names or a jump in secondary stock offerings as executives seek to capitalize on the euphoria. "It’s still early stages," he noted. "For all the names and tickers moving now, there will probably be three times as many in a month."
Companies Adding AI to Their Names
In an attempt to cash in on the AI trend, some companies are adding AI-related features to their products or services. Baidu Inc., China’s largest-search engine company, is planning to roll out a chatbot service similar to ChatGPT. However, this move has failed to lift the stock price.
The Future of AI-Related Stocks
As the hype surrounding AI continues to grow, it remains to be seen whether these stocks will continue to rise or eventually experience a correction. While some companies are well-positioned to benefit from the growth of AI, others may be overvalued and vulnerable to a decline in price.
Conclusion
The recent frenzy surrounding AI has sparked a wave of excitement among stock traders, with many companies experiencing significant price increases. However, veteran market professionals are warning that this latest bubble may be reminiscent of previous crazes. As the hype surrounding AI continues to grow, it remains to be seen whether these stocks will continue to rise or eventually experience a correction.
Sources:
- Bloomberg.com
- Wall Street analysts
- Michael O’Rourke, Jonestrading Institutional Services LLC
Recommendations:
- Investors should exercise caution when investing in AI-related stocks.
- Companies adding AI-related features to their products or services may not necessarily see a corresponding increase in stock price.
- The hype surrounding AI will eventually subside, and investors should be prepared for a correction.
