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© Reuters. FILE PHOTO: Artificial Intelligence words are seen in this illustration taken March 31, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
By Naomi Rovnick
LONDON(Reuters) – Experienced tech investors are hunting for undervalued opportunities in an over-valued space.
At stake is how best to invest in the potential of Artificial Intelligence (AI), which took a leap forward in November when Microsoft-backed OpenAI released its ChatGPT bot, without buying into a bubble.
Shares in Nvidia (NASDAQ:), which makes computer chips that train AI systems, have almost doubled since ChatGPT’s launch. The company’s stock market value at roughly $940 billion is more than double that of Europe’s Nestle. Nvidia surged some 25% on Thursday alone after forecasting a sales jump.
Shares in loss-making AI software company C3.AI, which grabbed the stock ticker, have risen 149% this year and Palantir Technologies (NYSE:), which has launched its own AI platform, is up 91% year-to-date.
Investors are chasing exposure to generative AI, the technology run by ChatGPT that learns from analysing vast datasets to generate text, images and computer code. Businesses are trying to use generative AI to speed up video editing, recruitment and even legal work.
Consultancy PwC sees AI-related productivity savings and investments generating $15.7 trillion worth of global economic output by 2030, almost equivalent to the gross domestic product of China.
The question for investors is whether to jump on the AI train now, or exercise caution, especially given mounting concern amongst regulators about the technology’s potentially disruptive impact.
“There are clearly going to be winners in all this,” said Niall O’Sullivan, chief investment officer of multi-asset for EMEA, at Neuberger Berman. “It’s just that that’s very hard to be true for the entire market.”
STILL EARLY
Instead of backing hot start-ups or rushing into highly valued AI-themed businesses that might fail, seasoned investors are taking a lateral view to back already proven technology companies that might benefit from the longer-term trend.
“It’s going to be as transformative as the internet, as the mobile internet, as the mainframe computer was,” said Alison Porter, a tech fund manager at Janus Henderson, whose funds have positions in Nvidia, with Microsoft (NASDAQ:) as their largest holding.
However, Porter also cautions that “we are still very early on the use cases for AI.”
She favours big tech…
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