Stock rallies tied to the latest market craze could be a good investment or could be caused by FOMO (fear of missing out).
That debate, which hits on the theme of several boom-to-bust cycles in some corners of the market, has been reignited after artificial intelligence (AI)-linked companies saw their shares pop as tech giants such as Microsoft Corp announced big investments in the industry.
The frenzy conjures memories of the crypto and cannabis crazes, and even the dotcom bubble in the late 1990s, where investors piled into stocks and asked questions later.
Photo: EPA
After Friday’s close, some firms added about US$5.2 billion in market value despite announcements that look more like half-baked plans.
“It is total buyer-beware unless you know what you’re doing and have proper risk management,” Tuttle Capital Management LLC chief executive officer Matthew Tuttle said. “You can’t just go in and buy any company that says they’re in AI.”
Generative AI, a label used to describe artificial intelligence technology that can create things such as art or text, and ChatGPT — the popular tool owned by OpenAI, in which Microsoft invested US$10 billion — have been mentioned in more than 165 earnings calls and news statements this year, more than the number of mentions in all of last year.
The citations come with good reason. The market for generative AI could be “exceedingly large,” easily “in excess of a trillion [US] dollars,” UBS Group AG analysts said.
The potential windfall is enticing investors, and underscores the fine line between trend-chasing companies hoping to make a quick return and those with goals to utilize a technological advancement to drive growth and earn billions.
BuzzFeed Inc, a struggling media company, soared 307 percent in a two-day frenzy last month on veiled plans to utilize AI.
After touting its AI plans in a statement, software company C3.ai Inc shares more than doubled this year with US$48 million in buying from retail traders, data from Vanda Research showed.
Meanwhile, semiconductor maker Nvidia Corp, which has been touted by Wall Street analysts as a beneficiary of greater investment in AI, posted its best month in almost six years, as its shares rallied 34 percent last month.
However, investors should proceed with caution as some companies are already starting to falter.
BuzzFeed shares have wiped out more than 40 percent of their value from an intraday high for the year last week, and video game software maker Versus Systems Inc is trading under US$1 per share after selling 2.5 million shares to capitalize on its rally.
Despite signs of speculative froth, AI has yet to reach the heights of the blockchain madness, when companies such as Long Island Iced Tea Corp rebranded itself Long Blockchain Corp to avoid delisting.
Tech heavyweights looking to use AI to grow revenue are likely the best places for investors to park their cash, Tuttle said.
There are lots of opportunities out there. Meta Platforms Inc chief executive officer Mark Zuckerberg said one of his main goals is to be a leader in generative AI.
During the company’s earnings call last week, Alphabet Inc chief executive officer Sundar Pichai said Google was an AI-first company more than six years ago.
Meanwhile, Snap Inc chief executive officer Evan Spiegel said generative AI is a huge opportunity that they are “already investing a ton” in.
The return of market liquidity as speculative corners of the investing world soar is another signal that investors should exercise caution, Tuttle said.
Many of the riskiest corners of the stock market have rallied to start the year. Cathie Wood’s ARK Innovation ETF is up 37 percent, and a basket of so-called meme stocks — a group completely detached from fundamentals — is 22 percent higher, while the world’s largest cryptocurrency based on market value bitcoin is up about 40 percent.
“Financial conditions are loose and it’s the perfect environment for anything new, and AI is the new kid on the block right now,” Tuttle said. “If you know what you’re doing, great, have at it. If you’re a FOMO person, stay away until this gets a little more settled.”
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to