The single most important issue for the stock market today is determining whether the Artificial Intelligence (AI) revolution will deliver on its promises of boosting productivity and reducing costs.Remember, since Chat-GPT was unveiled by OpenAI in November 2022, AI-related stocks have accounted for 75% of market gains, 80% of market profits, and 95% of capital expenditures. In this context, the entire bull market is effectively one gigantic bet on AI.The Bears and Doomers have been proclaiming for months that AI-related stocks are in a gigantic bubble and that it’s only a matter of time before this bubble bursts and a systemic crash hits.To be clear, there are some valid issues related to AI technology. The most salient at the time of my writing are:AI “hallucinates”, i.e. claims false/fictitious information as fact. All Large Language Models (LLMs) suffer from this with hallucination rates ranging from 15% to 52%. Unless the user is an expert on the subject matter, he or she has no way of knowing whether the information LLM is presenting is correct or not.AI suffers from “hive mind” or homogenous thinking. Researchers at Stanford performed a study through which they asked multiple AI models open ended queries (questions that do not have a single correct answer) 26,000 times. They discovered that:
The Bears Say AI Is a Bubble. The Profits Say Otherwise
As investors, our job is to make money.
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