Mad Hedge Technology Letter
September 4, 2024
Fiat Lux
Featured Trade:
(FEDS KNOCK THE WIND OUT OF TECH)
(AI), (NVDA), (MSFT), (META)
Tag Archive for: (AI)
The U.S. Federal government just took the air out of the tech market rally in the short term.
Good thing the market usually has a short memory.
Mr. Market did not expect the US Justice Department to barge in and subpoena Nvidia (NVDA).
Nvidia is the gem of the tech industry and the leader of the cutting-edge generative artificial intelligence sub-sector.
To take out Nvidia and destroy it, the tech market would be valued at significantly less than it is today.
Not to mention we are just 2 months away from the U.S. election, this sounds and feels like a bold political move behind the scenes.
Why not wait until after the election?
As it stands, the timing is pretty terrible for tech stocks as the amount of catalysts to take us to new highs has disappeared.
The past earnings seasons were nothing stellar and many tech companies sold off on poor forward guidance.
It is no joke that we have been waiting for over 4 years for the recession that still hasn’t come.
However, it seriously looks like we won’t be able to kick the can down the road anymore and the job market is starting to fall apart to the point where we will need rate cuts.
The DOJ believes Nvidia is too dominant and appears to look like a monopoly and the government is inching closer to filing a formal complaint.
Antitrust officials are concerned that Nvidia is making it harder to switch to other suppliers and penalizes buyers that don’t exclusively use its artificial intelligence chips.
Nvidia has drawn regulatory scrutiny since becoming the world’s most valuable chipmaker and a key beneficiary of the AI spending boom. Sales have been more than doubling each quarter.
Regulators also are digging into whether Nvidia gives preferential supply and pricing to customers who use its technology exclusively or buy its complete systems.
Nvidia Chief Executive Officer Jensen Huang said he prioritizes customers who can make use of his products in ready-to-go data centers as soon as he provides them, a policy designed to prevent stockpiling and speed up the broader adoption of AI.
Microsoft (MSFT) and Meta (META) spend more than 40% of their budget on hardware on the chipmaker’s gear. During the peak of shortages of Nvidia’s H100 accelerator, individual components were retailing for as much as $90,000 each.
There also are broader regulatory questions about Nvidia’s practices. Access to AI capabilities has become a key focus for governments around the world, with the technology becoming increasingly vital to economic strength and national security.
If NVDA shares drop to anything close to the $100 level, I do believe that is a great entry point to add to shares.
Much of the bad news has been priced in and at the end of the day, even if NVDA is broken up, it will happen 10 years later.
As for the larger tech story, September could be a weak month for tech stocks and it is a seasonably slow month.
However, the infrastructure build for AI data centers relentlessly continues, and from my channel checks, I see tech firms increasing their purchases of Nvidia AI chips.
This bodes well for the future and explains why sales keep doubling and doubling like it never ends.
Mad Hedge Technology Letter
August 30, 2024
Fiat Lux
Featured Trade:
(AI SQUEEZES OUT TECH WORK FORCE)
(AI), (NVDA)
Mad Hedge Technology Letter
July 5, 2024
Fiat Lux
Featured Trade:
(EXPENSIVE ENERGY A BIG WORRY FOR THE FUTURE OF AI)
(AI)
Mad Hedge Technology Letter
May 22, 2024
Fiat Lux
Featured Trade:
(THE AI DATA CENTER COOLING STOCK)
(VRT), (NVDA), (AI)
Mad Hedge Technology Letter
May 20, 2024
Fiat Lux
Featured Trade:
(AI GETS INTO MILITARY CONFLICT)
(PLTR), (AI)
Mad Hedge Technology Letter
May 17, 2024
Fiat Lux
Featured Trade:
(AI MOVES THE NEEDLE)
(TSLA), (AI), ($COMPQ), (SORA)
Compassion for humanity – that’s all we need – this is the only trait corporate Americans need for bosses like him to employ humans over AI filmmaker Tyler Perry.
That’s all a tall order for corporate tech ($COMPQ) in Silicon Valley which usually prefers not to prioritize compassion for humanity over profits.
That’s bad news for tech workers and we got more confirmation of this trend with Tesla (TSLA) CEO Elon Musk cutting 600 white-collar corporate jobs from the Fremont, California office.
Elon is usually one to be on the forefront of the curve and he isn’t late with the firing means we are just in the first innings of it.
An interview with Tyler Perry led him down the rabbit hole of the future of AI and it wasn’t pretty if you are a W2 worker.
As it relates to implanting AI, the one irrefutable conclusion he could make was that human workers would lose out at the expense of the bosses who would gain.
Over the past four years, Tyler Perry had been planning an $800 million expansion of his studio in Atlanta, which would have added 12 soundstages to the 330-acre property.
Now, however, those ambitions are on hold — thanks to the rapid developments he’s seeing in the realm of artificial intelligence, including OpenAI’s text-to-video model Sora, which debuted on Feb. 15 and stunned observers with its cinematic video outputs.
His productions might not have to travel to locations or build sets with the assistance of technology.
His expansions are currently and indefinitely on hold because of the quick developments of AI.
He might not need to invest in anything at all except some AI additive technology.
Perry said the job losses in his industry could range from writers, actors, sound specialists, builders, designers, architects, and so on.
Human actors are on the chopping block and the only digestible content that will be saved from the bloodbath is live sports which is why premium content like the NFL, soccer World Cup, and Alabama college football fetch astronomical numbers to license these games.
None of that will be replaced by AI, but much of the best of the rest will and the hundreds and thousands of jobs will sink with them.
Perry also described a situation in which he used AI which kept him out of makeup for hours.
In post and on set, he was able to use this AI technology to avoid ever having to sit through hours of aging makeup.
The movie industry won’t need to negotiate with the actor's or writers' unions again, because they are dispensable.
What will happen in tech?
Google and Apple will build products but with much less staff involved.
Compensation expense is about to drop precipitously without warning.
Remember that the dive into AI won’t be a drip, but a waterfall because once one figures out a way to optimize the technology, everyone else follows suit.
The copycats come out of the woodwork and reverse engineering takes hold.
If you thought that Congress is responsible to save the workers then you’ll be waiting for a long time.
Tech executives have been lobbying Washington for a generation, and I believe they will take the side of management.
And in any case, if the government does get involved, they usually make regulations too onerous to hire humans making the situation worse.
What does this mean for tech stocks?
They go higher.
Expenses will take a meaningful dive, dividends and buybacks go up with more cash on hand, and tech stocks comprise an even larger percentage of the overall market.
We have sunny days ahead for the tech sector.
AI WILL HAVE A BIG IMPACT IN THE MOVIE INDUSTRY
Mad Hedge Technology Letter
March 13, 2024
Fiat Lux
Featured Trade:
(COGNITION AI IS THE TALK OF THE TOWN)
(AI), (NVDA)
The AI war is heating up thanks to the new kid on the block Cognition AI.
They have certainly one-upped the competition.
Cognition AI’s team has a new type of technology called Devin.
Devin is a software development assistant in the vein of Copilot, which was built by GitHub, Microsoft, and OpenAI, but, like, a next-level software development assistant.
Instead of just offering coding suggestions and auto-completing some tasks, Devin can take on and finish an entire software project on its own.
The technology can even create websites within seconds. No coder will ever be able to compete with this.
As it works, Devin shows all the tasks it’s performing and finds and fixes bugs on its own as it tests the code being written.
The founders of Cognition AI are Scott Wu, its chief executive officer; Steven Hao, the chief technology officer; and Walden Yan, the chief product officer.
One of the big breakthroughs claims they can force a computer to reason with stunning efficiency.
Reasoning in AI-speak means that a system can go beyond predicting the next word in a sentence or the next snippet in a line of code, toward something more akin to thinking and rationalizing its way around problems.
It’s possible to give Devin jobs to do with natural language commands, and it will set off and accomplish them.
As Devin works, it tells you about its plan and then displays the commands and code it’s using. If something doesn’t look quite right, you can give the AI a prompt to go fix the issue, and Devin will incorporate the feedback midstream.
Most current AI systems go haywire soon after it veers away from the script. Off-schedule variables usually are hard for current AI to stomach.
What does this mean for the tech sector and the future of work?
A naïve person would say this will free developers from the drudgery of mundane tasks and let them focus on more creative jobs.
However, the smart crowd understands this will be a great excuse to cut staffing costs to the bone.
This will allow many non-coders to join in the game and totally bypass going through software developers who more often than not lack common sense.
Remember when the Chinese consumer went from cash to paying with QR codes via smartphones, they skipped over the credit card and America is still stuck on the plastic card.
People will be able to create 1-man tech companies and do the job of 100 people in no time.
This certainly is a winner-takes-all scenario and the mid-term future is quite bleak for software developers.
It’s looking highly likely and I would say ironic that the software developers creating AI are about to do a disservice to their colleagues and rid the economy of 99% of software developers.
Of course, AI isn’t that good yet, but the path is being laid and the countdown has been initiated.
With a few years of furious development of high-quality AI, this will usher in a golden age of tech stocks, because they will finally be able to fire most of the staff.
The advancement of AI can guarantee higher tech shares no matter what and many might say stocks like Nvidia are cheap because this trend is still in the early innings.
