Shares of the handsomely positioned US chipmaker Nvidia (NVDA) are up nearly 85% so far this year. We made a song and dance about them a few months ago.

Now those overpaid, late-to-the-party muffins over at some investment bank in New York reckon we’re onto a good thing.

Last week Goldman Sachs released a really big research paper which predicts Generative Artificial Intelligence will facilitate a mass market breakout for investors offering rich rides into an entirely different technology-driven run of innovation.

Goldman Sachs cited companies that mentioned generative AI the most on recent quarterly earnings calls. The top two were Microsoft (MSFT) OpenAI’s biggest investor and Shutterstock (SSTK).

Other Wall St names claiming early Generative AI territory according to GS during Q4 earnings were DHI Group (DHX) VeriSign (VRSN), eGain (EGAN) Globant (GLOB), and CSG Systems (CSGS), VeriSign (VRSN), and the data analytics software company Alteryx (AYX).
 

Best dressed

Nvidia is Goldman’s standout player on the S&P 500 right now, the early interest in a post-GPT chat AI world has lifted up the likes of Google (GGOGL), Amazon (AMZN) and Facebook Daddy Meta – which Goldman says are among the “best-positioned” to enjoy the AI emergence, but these mega-cap tech stocks, aren’t the only names in the game.

Honourable mentions also belong to Salesforce and Adobe which GS regards as key leaders in their fields. The brokerage raised its price targets on each of these companies, saying they stand to benefit from recent product announcements and their treasure troves of historical customer data.

Traditionally AI has been used for sifting through interminable reams of data and applied with a more analytical bent. These days it’s all about creativity.

Generative AI is doing some damn weird things. Generative AI can make a face funny and a funny face funnier. It can find a face, track a face, arrest the face’s wearer and, why not, make a face into its anime counterpart.

This kind of AI can already produce screamingly new content from scripts, dialogues, paintings, video, images or computer code – it’s creativity derives from sourcing…  already a step ahead.

Goldman Sachs says that Generative AI tools have “far-reaching implications across industries the new era will last at least a decade and looks ‘comparable to the introduction of cloud computing.’

Goldman analysts describe an AI-verse across everything from enterprise software to entertainment, fintech, healthcare, education and everything in between. A universe of possibilities, but minus potentially 300 million jobs.

The broader AI tech is prepped to create US$7 trillion in global economic growth over the next decade and within that, generative AI has a total addressable market of US$150 billion, they say.

Goldman also mentions in passing that roughly two-thirds of jobs currently performed by humans face ‘some degree of AI automation’, while Generative AI could ‘replace up to a quarter’ of existing human workers.

White-collar professionals, and apparently – I’m not sure why – US legal workers and admin staff, are right up there with the most vulnerable.

On the plus side for us at Stockhead, jobs with the lowest exposure to AI include cleaning and maintenance, installation and repair, and hard labour.
 

China-side

AI in the Middle Kingdom has been tracking humans with or without their permission since controlling a population was deemed both possible, necessary and a great idea. Chinese entrepreneurs, state-owned researchers, and state-inspired investors have been mucking about with generative AI quietly and diligently since SARS gave someone the idea of measuring temperatures at population control points.

More recently, the search engine giant Baidu has tried lifting its game, testing its we’re-all-going-to-die-driverless-taxis, before Christmas.

 

Baidu’s also declared plans for an AI-chatbot at some point in H1 2023.

“Enhanced Representation through Knowledge Integration” or the ERNIE bot, so far China’s closest answer to ChatGPT, arrived on March 16 when Baidu CEO Robin Li, gave a live streamed presso including pre-recorded demos displaying the Chinese chatbot’s different capabilities.

Reuters got hold of video showing Ernie summarising financial statements and producing powerpoint presentations, “among other industry-focused capabilities.”

Reuters says the videos were from a closed-door meeting hosted by Baidu’s AI Cloud division and featuring a Baidu spokesperson in a media-facing group on WeChat. The Ernie displays a wide set of industry-focused skills and certainly looks like having a wider range of AI capacities than when launched a fortnight earlier.

Baidu is most likely going to integrate Ernie into its ubiquitous Chinese-language internet search engine. (That’s going straight into the search engine!)

Certainly there’s x3 advantages Baidu has going for it right now.

No 1 is the Chinese language, No 2, the Chinese corporate sector and No 3 is the doting Chinese government. The first shows ChatGPT doesn’t handle Mandarin particularly well, the third of course is the Chinese government’s long history of protecting domestic tech from foreign competition. And the third are loyal investors.

When Ernie’s introduction caused Baidu shares to fall on the 16th, in swooped Chinese corporates to shore up the foundations.
 

Tencent: It’s so cute/we’re all gonna die

Perhaps more notable for its this-tech-can’t-hurt-a-fly Tencent’s Different Dimension Me, which can happily turn photos of your family and other people you despise into anime characters.

Here’s Elon Musk via the app…

 

Unfortunately, like the Chinese state, the AI generator is riddled with uninformed prejudices.

Intended to placate Chinese users with how harmless facial recognition technology really is, Diff Dimension quickly attracted users from all round the world.

But with actual diversity (large, small, round, diff coloured skin palates) not a real feature of either Japanese anime nor Chinese world perceptions, the platform managed to infuriate with all kinds of offensive results.

Tenecent say they’re working on it, but for now the results below tell us a lot about through what kind of lens China wants China to see…


 

Harvard Economics

Professor David Yang, an extremely clever man from Harvard says China is the ascendant AI global power full stop.

In particular he leans on a recent shady US government ranking of companies which are most adept at producing terrifyingly accurate facial recognition technology.

The top five were all Chinese companies. Bristling with state contracts.

“Autocratic governments would like to be able to predict the whereabouts, thoughts, and behaviours of citizens,” Yang said. “And AI is fundamentally a technology for prediction.”

Because AI heavily depends on data, and autocratic regimes are known to collect vast troves of it, this advantages companies with Chinese government contracts, which can turn around and use state data to bolster commercial projects, he added.

Yang’s research shows China exporting AI to every shonky totalitarian friend which can use it, an effort which is dwarfing its contributions in other frontier technology sectors.

The fact is autocratic regimes around the world have an unhealthy passion for what AI can do on the control, seek and intimidate front.

“AI quite startlingly is the only sector out of the 16 frontier technologies where there’s disproportionately more buyers that are weak democracies and autocracies,” Yang says.
 

The Gold men

Meanwhile back in the States,  the opposing tech giants already incorporating it into their products, Goldman sees generative AI boosting sales, productivity and product innovation.

Goldman said there will be opportunities for software companies to upsell and cross-sell products with AI. This will help increase customer retention and expand the customer base.

Despite the potential for these tools to spearhead unique business concepts across all sorts of industries, Goldman really likes Microsoft, Salesforce and Adobe.

Adobe – home of photoshop – recently launched Firefly, a cool sounding  AI thingy which will apparently let users type commands to quickly modify and generate images. Gosh that sounds familiar.

More significantly, they’ve signed an AI partnership with that company again – Nvidia – with a lazy plan to co-develop a “new generation of advanced generative AI models.”

It’ll turn Adobe’s Creative Cloud product portfolio into an Nvidia laboratory with Nvidia’s Picasso cloud service manning the bunsen burners.

Goldman likes it.

Analysts over yonder raised Adobe’s price target to US$480, that’s offering about 30% upside.
 

But getting back to Nvidia

According to Ritholtz Wealth Management boss Josh Brown the current scarcity of AI plays is causing an AI bubble, with Nvidia leading the charge.

Nvidia is up some 84% so far in 2023. The stock we focused on a few weeks back is far and away the top dog on the S&P 500 this quarter, with analysts forecasting the US chipmaker will deliver its best three months in more than 20 years.

“Nvidia is going to be the grand marshal of that parade, twirling the baton down Main Street,” Brown said as I half watched CNBC’s also pretty good Halftime Show.

Brown said Nvidia could keep rising all year.

Enabled by large language models, innovations like OpenAI’s ChatGPT, Microsoft’s AI-powered Bing search engine and Google’s Bard have renewed the buzz around AI.

Nvidia’s recent investor conference was all AI and dozy Wall Street analysts were all shok up by the end of it, saying Nvidia’s top spot in the AI field was all but assured after revealing all sorts of partnerships and unleashing its DGX Cloud, which in itself is used to train models for taking advantage of generative AI applications.

One true-believer, the Bank of America (BofA) no less, reckons Nvidia’s potential sector dominance in Generative AI and the large language model could “reshape the existing tech industry.”

In short, it’s the company making AI-for-punters possible.
 

Getting back to the AI arms race

As for the new technology arms race, the focus on research easily favours China, Emily Weinstein, a Security and Emerging Technology research fellow at Georgetown University told Foreign Policy recently.

But this metric misses key context, she says.

“You can write as many papers as you want; that doesn’t necessarily mean that you’re able to commercialise that specific technology.”

Chinese companies and scientists have long worked with their American counterparts on artificial intelligence, with firms such as Baidu setting up AI labs in Silicon Valley in the mid-2010s and researchers collaborating at US universities.

But cooperation has turned quickly into suspicion, fear and antagonism and … voila – the emergence of a Cold War AI arms race. And that isn’t all fun and games.

Read MoreArtificial Intelligence - AI

You might be interested in