February 25, 2024
Yes, there seems to be an AI investing bubble in Wall Street. It will most likely keep expanding further more before it bursts. After it bursts, many will lose significant amounts of money, but the AI industry will come out stronger than ever. In the near future and all through the 21st century, AI will become an integral part of human societies and will gradually shape a new type of humanity. In centuries or millennia to come, AI will help humans transcend biology into a transhumanism based on technology.
The AI bubble
These five U.S. technology companies alone Microsoft, Apple, Meta, Alphabet, NVIDIA (MAMAN) are collectively valued at almost $11T. That's $11,000,000,000,000! A year ago, their collective valuation was about $6T. Their market capitalizations have gone up by about $5T within the last 12 months. They have gained about 80% in value practically "overnight" since the mass debut of transformer generative AI models like ChatGPT and Google Bard.
Out of the five companies mentioned above, the poster children of the AI bubble are NVIDIA, Microsoft, and Meta. NVIDIA is the most bubblelicious of all with a market capitalizations of $2T. Microsoft is valued at $3T. Meta is valued at $1.25T. NVIDIA makes parallel processing microchips deemed essential for AI neural networks. Microsoft acquired 49% of OpenAI, the company behind ChatGPT. Meta is expected to leverage AI to keep making social media ever more addictive and ever more powerful in targeting human brains for customized advertising. Alphabet and Apple just complete the panorama of the picture. Apple is valued at $2.82T, and holds the valuation least tied to AI for now. Alphabet is valued at $1.8T, and has benefited from the AI fever in Wall Street.
Why are humans, investors, and markets so excited about AI?
Science fiction AI is finally here. Computers can understand natural human languages in context. Computers can perform parallel neural processing that mimics human intelligence. Computers can examine big data sets to identify patterns, learn from experience, and make predictions.
Since the advent of computers in the 1950s, computer scientists and science fiction writers envisioned a day when computers could process data like human brains. Early computer science pioneers like John McCarthy thought that it would be a matter of a few years for computers to mimic human intelligence. Instead, it took about a little over three quarters of a century for the technology to get there, but there it got and it keeps making progress on the daily.
After 75 years of continuous and relentless improvement in computer processing capacity and computer programming techniques, humanity can finally say that AI is here. The releases of generative AI language models like ChatGPT marked an AI technological milestone. Generative AI caught many by surprise and sparked an unprecedented interest in AI.
What will happen next?
No one knows for sure because the future has not been created yet. The universe operates as a creative matrix, or "creatix". Everything that exists in the present creates the future. History does not repeat itself. However, the same laws of physics that applied in the past apply now and in the future. The same elements create the same chemical reactions. Biological organisms are genetically programmed fairly similarly from one generation to the next. These variables can operate as semi constants that can help make predictions about the future.
Chances are that the AI financial bubble of the 2020s will resemble the dot.com bubble of the 1990s. It is not that history repeats itself literally, but that humans have not changed much since then. Similar fact patterns tend to lead to similar results over time. Yet, the future is always uncertain. There are no certainties, but rather probabilities.
What may happen next?
AI is computerized human-like intelligence. AI is a phenomenal technological accomplishment of humanity, especially that segment tied to Silicon Valley in California, and the semiconductor industry in Taiwan.
AI is a continuation of the computerization of human life. Just like computers and the internet disrupted and penetrated every single aspect of modern human society, AI will do the same. Mark this prediction. AI will penetrate absolutely every single segment of human society.
AI is a continuation of the information era that began with the deployment of computers and the worldwide network of interconnected computers called the "internet". AI is here to stay and will accompany humanity for the rest of its future history. AI will become an essential utility like potable water and electricity. All civilized humans will depend and rely on AI to conduct their daily lives on planet Earth.
When will the AI bubble burst?
Probably not any time soon. There is no limit to human imagination and its cousin, economic valuation. Money is as unlimited as intersubjective valuation. Whatever those in power want to collectively and intersubjectively decide things are worth, they are worth. That subjective value can then be converted into money, an unlimited token accounting for intersubjective valuation.
Money is simply a valuation technology. Money is a tool and method to account for the perceived value of things. Currently, AI has a high valuation and is making many humans incredibly wealthy practically overnight. This is because AI carries inherent promises of being as revolutionary as computers in the 1950s and the internet in the 1990s.
Why the AI bubble?
Investors are betting on AI to be the fifth installment of the computer revolution and the Information Era. Investors know how computers, the internet, smartphones, and social media changed everything. Investors know how digital information technology (IT) has proven to be an unprecedented gold mine, money-making machine, and creatix of economic value in the human world. Investors are betting that AI will prove to be Chapter Five of the book. Computers were the first chapter; the internet was the second, smartphones the third, and social media the fourth. AI would be the fifth chapter of the Information Era book.
Investors know that there are no objective limits to subjective valuation. Investors are betting that AI will disrupt every segment of human society, with unlimited problems to solve and opportunities to create value (make money).
The sky's the limit when it comes to the subjective valuation and market capitalization of AI ventures. That is what creates a bubble and that is why it so difficult to predict when will it burst. The investments being made today in the AI "arms race" will keep delivering impressive results, feeding the growth of the bubble.
AI related valuations can be expected to continue rising irrationally for some time. There will be ups and downs, but the trajectory will be bubblicious upward. The value proposition of AI will continue increasing. Eventually, when the masses are convinced that this time is different and that AI valuations can only go up, that's when those at the top will begin to pull the plug into an avalanche that will burst the bubble.
What will happen after the AI bubble bursts?
As always, some will experience significant losses. There will be calls for action. Angry investors who got late to the game or that lost common sense in the speculative frenzy will seek "justice" politically and judicially. Congress will hold hearings. Judges and arbitrers will handle many disputes. Eventually the dust will settle, and the AI industry will come out stronger than ever before.
The AI bubble may be similar to the dot.com bubble. While many dot.com darlings of the 1990s disappeared, wiping out fortunes, the internet industry came out stronger. A similar scenario may very well play out in the context of AI.
What will AI do in the future?
AI will change and disrupt everything, absolutely everything. In the near future, AI will be deployed as an intelligence utility. AI will be used for every modern human activity just like potable water, electricity, and internet connectivity are distributed today. Eventually, in the very distant future, AI will lead to transhumanism.
In the near future, AI will help humans increase their knowledge about everything. Knowledge is gained from the experience of exploration and experimentation guided by higher learning education. AI will help humans explore and experiment running simulations. AI will facilitate and expand higher learning education. In the distant future, AI will help humans transcend the limitations of organic chemistry and biology. AI and humans will develop new life forms that will conquer Earth and nearby sections of outer space. These will be partly or completely inorganic (artificial) life forms that will not be constrained to the painful limits of organic chemistry and biology, but that will be significantly superior due to artificial technology.
Stay tuned. The best is yet to come.
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