My take on AI as someone entering the stock market for the first time
I want to preface this by saying that I've been holding 40% of my capital (which ain't much, don't worry) in liquidity coming from bonds for the past 3 weeks and I have been looking for just what the fuck to do with it.
I followed the news and read on fundamentals for months and it's fair to say that I simply don't get it. I wanted to invest and DCA into a broad ETF for peace of mind, but they all are balls deep into US stocks, which is neck deep into AI stocks. **This is not a bull or bear case**, I have genuine concerns and I want to ask legitimate questions and consider legitimate answers.
**I don't think AI will land**
It is my understanding that AI is the next huge thing and is here to stay no matter what. I don't use AI daily, but when I do I'm frankly blown away by the amount of knowledge I can access with a simple prompt, and the simple and efficient way it is presented. I can brainstorm, ask specialized questions, play and interact, and ultimately circumvent, in a way, the fact that AI is a product that wants to sell itself - a product that will make sure to be extra friendly, pick up and build on my biases, and stick to my point of views without challenging them unless explicitly asked.
Despite there being some sort of structure to make it palatable to the broad public, AI is largely a blank canvas. A black box, stuffed with an unfathomable amount of information, awaiting to rearrange and neatly present whatever it is asked to. We don't positively know what happens inside the black box, but we can tell what is not happening based on the output. AI can not match the meaning of a word to the physical concept it describes, it can only understand the relationships between the concepts and generate the linguistics necessary for a human to pick up on these relationships. AI may generate, but can not create. The idea that scaling current AI will somehow turn it into an AGI is bizarre. It will be better, and faster, and hopefully convenient, but this is it, this is what we're getting. It's a great tool and will be a gamechanger, but it costs a gorillion dollars and where the actual fuck is it coming from?
**Where is the money?**
So we're scaling AI. Cool. There's an energy bottleneck, which means they are going to need nuclear reactors, best if private to cut the middleman. There's a hardware bottleneck, which is very expensive and will need to be replaced every 3 to 5 years. Even big corps do not have the capital to take on this obscene investment, which is why they are taking debt. We know there were instances of circular funding between hardware and software houses. Finally, we know that the current business model is unsustainable.
The switch to task based pricing is a step in the right direction, but as far as I know this means the price of AI will increase exponentially. This ain't too bad, as big corps will be forced to adopt AI if it is proven to speed up process across the board, and will pay for it dearly if they mean to stay competitive. Older models could become a staple for the broad public and stay as (hopefully) lucrative subscription based services, at worst this could increase the lifespan of existing hardware, assuming it won't be cooked by then.
We've seen zero net enterprise models play out in the past with extreme success. At some point, Amazon operated like this to destroy and discourage existing and future competitors, until it established itself as a monopoly and started the enshittification protocol. This *works*, but Amazon did not reinvent the wheel, it just made it extremely convenient to buy one from them. Amazon was a great logistics company driving a hard bargain, nobody double guessed the value of their product, just the price. With AI, we're setting the price while still guessing the value.
**My 2 cents**
The reason I'm reluctant to invest in AI is that I just don't see the current iteration being monetizable in the short to medium term. Recurring investments will flood the industry with debt with no guarantee of short or medium term return over investment. I'm fully convinced big tech will absorb the smaller AI companies when they will bankrupt, while actors involved in the fundings may suffer losses. A broad ETF with high exposure to US stocks is unappealing to me in this specific moment for this reason.
The winner is probably going to be Google because of how diversified it is, and some time in the future Amazon will greatly benefit from robotics and AI tech. I'm 100% willing to bet on this. As for the semi-conductors, they still have a lot of juice to squeeze but that is a play everyone and their mother is aware of and I believe they are one of the few fairly (yet, enthusiastically) priced stock involved in this mess.
So what do I do with my liquidity? Does my argument even make sense? My portfolio idea so far:
**Core** (65%)
\- An Equal Weight Index fund such as RSP
\- An Ex US ETF such as EXUS
**Satellites** (25%)
\- Thematic ETF for nuclear energy
\- A commodity ETF
\- A rare earth ETF
**Single Stocks** (5%)
\- Google
**Shelter** (5%)
\- Gold, silver, or crypto