☕ What many AI naysayers are missing when it comes to investing

Good morning! 👋 

I hope you’re off to a great start as we are here in the wee hours of a new day in the PNW. 

There’s very little in the headlines that we haven’t already talked about. 

I propose we take a “breather” of sorts. 

And focus on AI. 

My take yesterday on a popular line of cautionary thinking – see #5 - touched a nerve. 

Which, as is often the case when that happens, suggests there’s tremendous profit potential ahead for investors who recognize the opportunity. 

1 – What many AI naysayers are missing 

There's a popular line of thinking making the rounds right now that AI will somehow stumble because there isn’t enough power and that new chips are so fast that existing data center infrastructure can’t keep up. 

The read between the lines version is that investors will be disappointed because they’re early to the game. 

I beg to differ. 

Early is exactly what you want to be as an investor in this situation. 

Stock values are based on future earnings expectations and contrary to what many people like to believe, they tend to go up over time. 

I don’t know of a single person who regrets buying NVDA in 2006 when it first began making the pivot to AI chip production by adding CUDA to its GPUs. But I’ve heard plenty of stories about people who are struggling to catch up now that it’s returned 33,015.45% since and they’re not on board. 

Makes sense. 

Every $1,000 invested in NVDA stock on January 1 that year would be worth $331,154.52 today according to finmasters, an average annual return of 37.43%. 

Limited power and old chips are an accelerant, not a party pooper. 

There may be 5-10 “Nvidias” out there right now. 

2 – What can power it all? 

OpenAI CEO Sam Altman noted in Davos that AI tech will require a power “breakthrough.” 

But in what? 

“We need fusion or radically cheaper solar plus storage, or something, at massive scale – a scale that no one is really planning for,” said Altman. 

I agree. 

And there’s your investing road map. 

• Fusion 
• Modular, safe nuclear energy 
• Abundantly cheap solar plus storage 
• Scale and transmission capacity 

There’s a growth story of epic proportions building in the wings. 

Pessimists, of course, are looking at the situation and thinking to themselves about all the reasons why AI will get held back because the grid is outdated, power lines can’t transmit, overall demand is off the charts... yada, yada. 

Optimists are looking at the situation and thinking, “hey, how can we make this happen.” 

Savvy investors would be wise to pay attention, not cower in fear. 

Optimism is closely linked to innovation, growth, and profits over time.  

What’s more, maintaining a positive outlook during periods of transition like the one we’re living through now can help investors like us stay focused on our long-term goals and avoid making rash decisions based on fear or short-term market fluctuations. 

3 – Yeah, but... 

I get it. 

There's never been anything like this in human history. 

What’s happening is hard to process. 

One study suggests that Microsoft’s Copilot and ChatGPT could consume enough power so as to be on par with a small country by 2027. Another data point I’ve seen suggests that every one Generative AI query consumes one water bottle for cooling. 

Even that’s an opportunity. 

Stop thinking in terms of constraints and start thinking in terms of enablers. 

Quantum computing, for example, may require 1/3rd the power of conventional computing methods. 

I think we’re only a year or two away from a “ChatGpt” like moment in terms of public awareness, which is why I’ve already got a toe in the water in this department and have suggested to the OBA Family they do the same. 

AI is challenging because humans are wired to have a bias for the well-known which is why a corresponding fear of the unknown trips up so many people despite best intentions. 

That’s the real challenge nobody wants to talk about. 

Change is uncomfortable not because it’s happening but because change challenges their sense of control and stability. 

Take the invention of the printing press, for instance. 

The Catholic Church, monarchs and political leaders resisted ferociously when it came on the scene in the 1400s because it threatened livelihoods, challenged hierarchy, and was thought to lead to the dissemination of poorly edited, inaccurate data - all of which turned out to be true. 

However, we also know now that the printing press enabled the emergence of scientific methods, the Age of Exploration, Enlightenment and more. 

AI will be similar. 

Only this time around the lines between human and machine will blur whether we like it or not, particularly as brain-based augmentation approaches. 

4 – The real challenge is denial, not a lack of investing potential 

AI sounds so threatening because the historic patterns like social connectivity, innovation and breakthrough thinking that they’re challenging simply haven’t been at the forefront of the human condition before. 

What we’re learning – for better or worse - is helping us identify and understand relationships that were previously unknown. And, in many cases, denied. 

The Industrial Revolution is the parallel here. 

We’ve got to come to terms with the balance between technology as it advances and the risk to benefit analysis that comes along for the ride. 

Technology ethics will become a new discipline as society experiments with everything from generative AI to swarm intelligence, social decision making and even universal basic income. 

5 – Dator’s Law 

Dator’s Law is named after Jim Dator, Professor Emeritus, and former Director of the Hawaii Research Center for Futures Studies.  

It posits that, “Any useful statement about the future should appear to be ridiculous.” 

I agree. 

That’s why AI doesn’t scare me or frighten me into not investing like it does a lot of people. 

AI is not about ideating the past, a move billionaire investor Peter Thiel would call “n+1” and I term “more of the same, but different.” 

The way I see it, humanity constantly transitions between alternatives including previously unimaginable futures. 

Not just the one we thought we knew was coming. 

Bottom Line 

Big, real, and sustainable investing themes start “somewhere” and usually, history shows, at a moment when most people least expect it or come up with all sorts of reasons why it won’t. 

You got this! 

As always, let’s MAKE it a great day. 

Keith 😊