Shares in small artificial intelligence groups have soared this year on the back of the hype surrounding ChatGPT and other generative AI models, leading analysts to warn of a “speculative” bubble in the making.
Last year marked a breakout year for AI that can produce fluent textual responses to questions, draft poems and stories and generate images on demand. Microsoft hopes to employ the technology used in OpenAI’s ChatGPT chatbot to overturn Google’s dominance of the internet search market. Alphabet hopes its own conversational AI service, Bard, will stop users from jumping ship.
Big Tech’s embrace of generative AI has sparked frenzied interest among investors. BuzzFeed’s stock rose 150 per cent in a day in late January after chief executive Jonah Peretti said “AI inspired content” would begin appearing on the company’s website later this year.
Generative AI technology was showing “all the usual hallmarks of hype: social media echo chambers, exponential venture funding and a polarised media”, said analysts at Morgan Stanley. “During our travels around the US last week, ostensibly to discuss decarbonisation and reshoring, conversation regularly turned to ‘and what do you make of ChatGPT?’”
US companies offering all manner of AI-related services are reaping the rewards.
Shares in SoundHound AI, which specialises in “speech to meaning” technology, have jumped 94 per cent so far this month. Shares in C3.ai and BigBear.ai have shot up 103 per cent and 561 per cent respectively since the start of the year, although both remain well below all-time highs hit during the stock market bull-run that began in 2020.
Such groups have quickly become popular with retail investors who have piled into equities recently as global economic forecasts have improved. Data provider VandaTrack this week said it expected a “continuation of speculative activity” in AI-related stocks as long as macroeconomic conditions remain favourable.
ChatGPT in particular has caught the public’s attention, drawing around 100mn monthly active users in January after launching the previous month, according to UBS.
“In 20 years following the internet space, we cannot recall a faster ramp in a consumer internet app,” the bank said. “It took TikTok nine months after its global launch to add 100mn incremental users and it took Instagram 2.5 years.”
Even so, some investors burnt by last year’s sharp sell-off in once high-flying blockchain and Web3 stocks are wary of betting on the latest fad. Alphabet’s shares fell almost 8 per cent after Bard last week produced an ambiguous answer to a question about pictures taken by the James Webb Space Telescope.
Others worry what the technology might mean for jobs. “Replacing brains with a machine will do to middle-class jobs what replacing muscles with a machine did to working class jobs: lots will be destroyed and those left will have to be either very skilled or very unskilled,” said Rabobank.