Investing Thread

[Skatastrophy]

And in turn I present some history for your evaluation:

The only profitable "AI" company is NVDA since they're the ones selling pickaxes during the goldrush.

It is extremely expensive to do bleeding edge research & engineering work. They're building the planes while they're flying them right now. I feel like your argument is against 100% of growth-stage companies.

[jficke13]

No, I'm just very critical of the current crop of "AI" companies, and particularly critical of OpenAI's deal with Apple (at least OpenAI's end of that deal).

Growing into markets, using VC to fund a burn rate during development and growth, the Amazon model of never (or rarely) showing a "profit" while growing are all perfectly viable, but pointing to Google as a model might not be the best example because Google was obviously successful, and many other companies that have tried similar growth models may not have been but we don't know their names. Where companies in those early stages succeed is when they have a use case for their products/services. OpenAI and the consumer "AI" products being glommed onto anything and everything have no mass market use case beyond novelty (e.g. I guess it's kinda neato that I can put in a bunch of ingredients and get a recipe... but I hope it's not a bad recipe" or "It's kinda neat to be able to describe a picture and have Midjourney give me a rendering of what I described... but I hope it's not either blatantly plagiarized or fundamentally flawed in an uncanny valley kind of way... also I cannot copyright it, so the commercial viability is minimal").

They have niche use cases for niche industries. People say ChatGPT helps with writing code, but I'm not a coder so I can't evaluate those claims. I am a lawyer, and I see people using it badly in my field. I am also a writer, and I see people using Midjourney for book covers, I see "AI" text to voice being used to create audiobooks without paying for narrators, and I see things powered by ChatGPT (Sudowrite) being used to create very, very, mediocre prose in vast quantities that are then being flooded onto Amazon via their selfpublishing platform. I'm sure there are niche applications I'm unaware of as well. There's no doubt about that.

The tools that are currently on offer are being hyped as though every single person on earth can and should use them (just like smartphones or google search reach just about the ubiquity-level of TAM), but what OpenAI and the rest of the LLM-based "AI" tools can do is decidedly not on that level. Absent a radical improvement in the fundamental way in which these programs operate, I doubt they ever will grow into the hype.

I've been skeptical of tech's run of very hyped vaporware for a few years/cycles now. Web 3, Blockchain, NFTs, Crypto, the Metaverse, it's a daisychain of wildly overinflated marketing promises that have each more or less fizzled or at least failed to grow into the ubiquity being promised. I think this crop of "AI" tools is on some version of the same trajectory. I'll be interested to see if I'm wrong.

[Skatastrophy]

Yeah I agree somewhat with your teardown of the current state of AI. It's only good at a couple of things when it comes to work:

1. Summarizing documents & conversations into consumable TL;DRs
2. Providing a chat interface to answer questions when it's been pointed at a large cache of authoritative data

All of current "AI" is derivative information in that it can't extrapolate, but "AI" does frequently hallucinate. It will accelerate our society's dive towards information that was sourced from something that wasn't an authority.

That being said: OpenAI's business model is common and sound, and people find AI chatbots fun so there's a tremendous market for them. I try not to discount when the masses have clearly spoken. This stuff has much wider adoption than VR & NFTs and crap like that.

[rocky_warrior]

pointing to Google as a model might not be the best example because Google was obviously successful,

I'm not necessarily claiming OpenAI will be successful (though I suspect they will), but rather AI in general will be successful.  Much like people doubted Google could be successful (see the linked article).   

The thing about AI right now, is that it's mostly entertainment for people.  But also...people WANT to use it.  Much like early versions of search engines.  The AI "apps" will get better, and it will be integrated into our daily life (if you use Google products, it already is).  It will make a lot of money for people.

Should add...I've been interested in AI since I was a child.  And while I'm no expert in the current iterations - I don't really think of LLMs as AI (as most of us envisioned).  Implemented properly they can be really useful, but companies are only now starting to understand how to get them there. 

[MU82]

FedEx, long considered a "bellwether stock" because it's been a leading indicator of the direction of the market and/or the overall economy, is up 13% premarket.

After yesterday's close, FDX presented an outstanding quarterly report that included earnings and revenue beats and favorable guidance. The company also announced a $2.5B buyback program.

[Hards Alumni]

I'm not necessarily claiming OpenAI will be successful (though I suspect they will), but rather AI in general will be successful.  Much like people doubted Google could be successful (see the linked article).   

The thing about AI right now, is that it's mostly entertainment for people.  But also...people WANT to use it.  Much like early versions of search engines.  The AI "apps" will get better, and it will be integrated into our daily life (if you use Google products, it already is).  It will make a lot of money for people.

Should add...I've been interested in AI since I was a child.  And while I'm no expert in the current iterations - I don't really think of LLMs as AI (as most of us envisioned).  Implemented properly they can be really useful, but companies are only now starting to understand how to get them there.

I think what is being discounted in this thread is the potential of AI.  That is why investment is so high, and the hype is insane.  No one wants to be the person that misses the boat on the next big thing.

Are the actual use cases very limited as Skat and jficke said?  Absolutely.

But stock prices aren't driven by profitability, but instead potential.  Sort of like NBA picks!

I know I am stating the obvious here, but I just wanted to say it aloud.

[jesmu84]

I think what is being discounted in this thread is the potential of AI.  That is why investment is so high, and the hype is insane.  No one wants to be the person that misses the boat on the next big thing.

Are the actual use cases very limited as Skat and jficke said?  Absolutely.

But stock prices aren't driven by profitability, but instead potential.  Sort of like NBA picks!

I know I am stating the obvious here, but I just wanted to say it aloud.

Isn't it that kind of thinking that got a bunch of "smart guys" in trouble when it came to situations like Theranos?

[Hards Alumni]

Isn't it that kind of thinking that got a bunch of "smart guys" in trouble when it came to situations like Theranos?

Yes, and it's the reason for a lot of bubbles in the history of investing!

[TSmith34, Inc.]

Isn't it that kind of thinking that got a bunch of "smart guys" in trouble when it came to situations like Theranos?

Not really the same thing, unless the companies with AI products are all changing/faking scientific data and partaking in massive fraud.

[Skatastrophy]

Isn't it that kind of thinking that got a bunch of "smart guys" in trouble when it came to situations like Theranos?

I'm going to be explicit: This is an incredibly bad analogy. Theranos was lying to their investors (and everyone) about even having a working product.

The current generation of AI is in use and widely available. The only people that are confused about the future prospects are people that probably don't understand a lot about what's going on in the world around them.

I get your point, but the Teranos example is a terrible one. The Theranos people all deserve to be in jail for a long long time.

The risk with AI is if the technology starts accelerating more slowly. Ofte times tech accelerates slowly, and then experiences huge leaps forward. Other parts of tech advancement (transistor size, digital camera advancement) follows Moore's law (doubling every two years). What nobody knows right now is if we're at the end of a growth spurt or the beginning. Hence the broad investment/gambling on this novel tech.

[Dish]

Nike getting taken to the woodshed, lit on fire, then being dumped into the ocean today.

[Skatastrophy]

Nike getting taken to the woodshed, lit on fire, then being dumped into the ocean today.

Cyclical stocks, man. I'm never going to be good at predicting brand/fashion sales.

> Nike chief financial officer Matt Friend said that the 10% sales decline it expects for the current quarter "reflects more aggressive actions in managing our classic footwear franchises; continuing challenges on Nike Digital; muted wholesale order books, with newness not yet at scale; a softer outlook in Greater China; and a number of quarter-specific timing factors."

Look at Abercrombie since last year, 450+% pop.

[The Sultan]

Nike getting taken to the woodshed, lit on fire, then being dumped into the ocean today.

Video I watched today on Nike's recent issues

https://www.youtube.com/watch?v=jOOpoF4nzl0

[MU82]

Thanks for that, Sultan. I like value plays, but one has to be really patient with the likes of NKE right now. I have a little in my grandkids' college fund but don't own any in my main portfolio. I'd probably like to see a catalyst to the positive side before thinking seriously about diving in; it's OK if I miss the very bottom.

Meanwhile, a decent little TSLA rally the last couple of months has pushed my position into positive territory. I could say, "Welp, it's been fun. I can sell now with a slight profit and bit adieu to Elon." But now that he's gotten what he wants, maybe he'll actually manage Tesla smartly again? I'll ruminate on that a bit.

[MU82]

From Yahoo Finance:

In the first half of 2024, stocks leapfrogged the wall of worry to deliver another solid set of six-month returns, leading the S&P 500 to a respectable 14.5% gain and the Nasdaq Composite to an even loftier 18% win.

If history is a guide, stock seasonality still favors the bulls in July. In fact, the Nasdaq has closed green in 10 of the past 11 Julys.

This bullishness extends into full-year results as well.

‌Looking back to 1928, there have been 29 years when the S&P 500 was up 10% or more at the halfway mark. By year-end, the average gain was 24%.

In each of the prior 12 instances of strong starts to the year going back to 1988, the second half of the year closed positive.
‌

[Shaka Shart]

Video I watched today on Nike's recent issues

https://www.youtube.com/watch?v=jOOpoF4nzl0

Go woke, go broke!

[MU82]

New highs for the S&P 500 and Nasdaq.

https://seekingalpha.com/news/4122142-stock-market-news-today-nasdaq-sp500-dow-jones?

[Skatastrophy]

New highs for the S&P 500 and Nasdaq.

https://seekingalpha.com/news/4122142-stock-market-news-today-nasdaq-sp500-dow-jones?

I am a genius investor and it has nothing to do with year after year of ATHs.

[MU82]

Mr. Market likes the job numbers.

https://seekingalpha.com/news/4122390-stock-market-news-today-nasdaq-sp500-dow-jones

[SoCalEagle]

Another great day in the markets to close out the week.

As The Cars used to sing "Let the good times roll ..." 

[Jay Bee]

Stock market doing the goodest job it can do!

[MU82]

Fed rate cut coming in September? From the WSJ:

The U.S. added 206,000 jobs in June, slightly beating expectations and continuing a strong run, the Labor Department reported. The unemployment rate ticked up to 4.1% last month, indicating slack in what has been a strong labor market. Other indications that the job market is continuing to cool include the smallest average hourly earnings gain since 2021, revised lower April and May job counts, and the entrance of more people into the labor market. A hot job market makes it more difficult for the Fed to lower rates; the central bank is also mandated to keep the job market as strong as possible without triggering inflation. The Nasdaq Composite and S&P 500 closed out the week at fresh highs after the new data shored up confidence that the Fed can soon cut rates.

[jficke13]

I've noted here a bunch that I'm a big bear on the generative AI trend (I think it's a hype cycle mostly, but not exclusively, chasing venture $ and a Wall St-focused pop of being able to say "We're doing the next big thing" irrespective of a business' actual interest in executing a gen-AI product/strategy). Lots of people have and will continue to say that it's the future and I'm being a luddite or a buggy whip manufacturer or whatever. The PR hype is there, but does the smart money agree? Goldman is skeptical.

"Goldman Sachs's Head of Global Equity Research doesn't believe that generative AI is capable of solving complex problems, and says the tech industry "is too complacent in its assumptions that costs will decline substantially" (quoting an Ed Zitron tweet)

[rocky_warrior]

I've noted here a bunch that I'm a big bear on the generative AI trend

Did you just post a picture of a PRINTED OUT goldman report?  Hah.  No wonder you hate AI.  You probably think PDFs are a fad too :p

See Page 10 (or read the whole report if you like)...
https://www.goldmansachs.com/intelligence/pages/gs-research/gen-ai-too-much-spend-too-little-benefit/report.pdf

[jficke13]

It was lifted from the tweet. Low hanging fruit.