Alphabet CEO Sundar Pichai speaks at a Google I/O event in Mountain View, California in 2024. Earlier this month, the company paid US$2.4-billion to license technology from early stage AI star Windsurf.Jeff Chiu/The Associated Press
In recent months, the race to develop artificial intelligence has turned into a stampede.
One way to gauge the pandemonium is to follow the bidding war for top talent. OpenAI chief executive Sam Altman made headlines a month ago when he accused Meta Platforms Inc. META-Q of trying to lure his key employees by dangling signing bonuses of US$100-million in front of them.
Other companies are also paying huge sums for talent through “acqui-hires” in which they nominally pay for technology, but really acquire people. Last year, Microsoft Corp. MSFT-Q shelled out US$650-million to buy non-exclusive rights to technology from Inflection, an AI startup, and, more importantly, to hire most of its staff. In a similar move, Google parent company Alphabet Inc. GOOGL-Q paid US$2.4-billion earlier this month to license technology from Windsurf, another early stage AI star, and hire its chief executive and a few other key employees.
You have to enjoy this paradox: It seems the mad dash for artificial intelligence is making some humans more valuable than ever. And why not? The stock market loves the notion of AI. It is happy to pour endless amounts of capital into any company that has a serious chance to develop machines with human-like brains.
The payoff for whoever wins this technological race could be huge. Systems with “artificial general intelligence,” or AGI, would be able to beat people on any cognitive task they encounter. That level of performance is only five to 10 years away, enthusiasts predict.
What’s not so clear is how investors should position themselves for this brave new world. There are far more questions than answers.
Start with the question of who the big winners will be. For now, the market is putting its faith in seven companies – Amazon.com Inc. AMZN-Q, Apple Inc. AAPL-Q, Alphabet, Meta Platforms, Microsoft Corp., Nvidia Corp. NVDA-Q and Tesla Inc. TSLA-Q. This handful of businesses make up nearly a quarter of the world’s entire stock market wealth, as measured by the MSCI World Index. Their staggering size rests, in part, on the widespread belief that they are well positioned to reap the benefits of AGI.
Perhaps so. But here’s the funny thing: The confidence that investors are showing in these companies rests more on hope than anything we can predict rationally. Despite the markets’ willingness to throw around billions of dollars, nobody can say what shape the AGI industry might take.
It’s possible to envision an apocalyptic scenario in which the first company or country to achieve true AGI then uses the technology to keep improving its own capabilities at speeds no team of human researchers can match. The successful pioneer might have only a small lead at first, but the gap between its product and those of its rivals would widen as it used its AGI system to keep expanding its own intelligence in an infinite loop of increasing cognitive power. Ultimately, this super-powerful AGI might dominate the world in a winner-take-all market.
Or not. It’s also easy to imagine a future in which several organizations arrive at something like AGI at roughly the same time and then have to compete with each other for attention, much as they do now with rival chatbots. Rather than ruling the world, they might find themselves locked in a low-margin, penny-pinching battle for customers, like rival grocers competing to offer the lowest price on ketchup.
The wider impact of AGI is just as uncertain. Most of its benefits may flow to a small group of developers. Or perhaps those benefits will be widely shared by consumers and we will enter a new golden era of light-speed economic growth.
Forecasts are all over the map. Daron Acemoglu, the Nobel laureate economist, thinks AI will provide only a tiny nudge to productivity – something on the order of 0.05 per cent a year. In contrast, J.P. Morgan researchers think AI could swell the global economy by 10 per cent.
Investors might want to keep a few thoughts in mind as they attempt to navigate this uncertain future.
First, keep your expectations in check. History suggests we should be cautious about assessing the impact of any technology. Consider the advent of the internet in the 1990s, which was followed by the arrival of smartphones a few years later. These twin technologies changed our daily lives.
By some measures, the stock market’s current infatuation with
artificial intelligence is even greater than its ill-fated dotcom crush
in the late 1990s. The 10 biggest companies in the S&P 500 –
mostly tech giants – now trade for staggeringly high multiples,
especially in comparison to the rest of the market
(Forward price-to-earnings ratios)
the globe and mail, Source: Apollo chief economist
By some measures, the stock market’s current infatuation with
artificial intelligence is even greater than its ill-fated dotcom crush
in the late 1990s. The 10 biggest companies in the S&P 500 –
mostly tech giants – now trade for staggeringly high multiples,
especially in comparison to the rest of the market
(Forward price-to-earnings ratios)
the globe and mail, Source: Apollo chief economist
By some measures, the stock market’s current infatuation with artificial intelligence is even greater
than its ill-fated dotcom crush in the late 1990s. The 10 biggest companies in the S&P 500 – mostly tech
giants – now trade for staggeringly high multiples, especially in comparison to the rest of the market
(Forward price-to-earnings ratios)
the globe and mail, Source: Apollo chief economist
Oddly, though, their impact can be seen everywhere except in the growth statistics. The U.S. and Canadian economies have expanded no faster with the internet and smartphones than they did without them. The lesson here is simple: Technology doesn’t necessarily supercharge economic growth.
This brings us to a related point: Early leaders don’t always pan out. Several of the companies that dominated the early days of the internet – America Online, WorldCom and Pets.com – faded from prominence in subsequent years. The same could hold true for artificial-intelligence companies. Their lush valuations seem to assume a level of success that is far from assured.
That raises a final thought: It’s impossible to pick long-term winners at this early stage. If you want to invest in an AGI future, the best way to do so might be to buy a broad-based fund that tracks the Nasdaq index or some other tech benchmark. If artificial intelligence lives up to its hype, you’ll benefit. And if not? You might still do fine from wins in other areas.