ChatGPT Unleashes Stock Trader Stampede for Everything AI

(Bloomberg) — A $480 billion maker of chips whose processors are used for complex computing tasks. A digital media company looking for new content technologies. A small software company whose shares traded below $1 for most of December.

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These are a few different companies whose stocks are benefiting from the euphoria surrounding artificial intelligence — the latest buzzword to send traders into a speculative froth — and bringing back memories of past bubbles.

The boom in companies with AI in their names reminds market veterans of previous frenzies like the one in 2017 sparked by blockchain technology. During that period, there was a rush for exposure — by both companies and traders — only to see the frenzy fizzle out and the stock’s gains disappear. While AI is undoubtedly a huge growth opportunity and a topic that investors should take seriously, buyers should be cautious, said Jonestrading’s Michael O’Rourke.

“We’ve had tons of episodes like this where a band gets hot and everyone just piles into everything about it,” O’Rourke, the company’s chief marketing strategist, said in an interview. “As for anyone betting on names and tickers, it’s going to be a wild ride for them. If you are speculating, you are not investing.”

The massive popularity of OpenAI’s ChatGPT tool has generated a lot of excitement about potential AI use cases since it appeared late last year. Microsoft Corp. is investing $10 billion in OpenAI, which needs funding and cloud computing power to run increasingly complex models. Microsoft said it plans to use OpenAI models in current and future products.

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Wall Street analysts say semiconductor maker Nvidia Corp. identified as a beneficiary of greater investment in AI as it dominates the market for graphics chips that provide computing power for software models. Its shares rose 34% in January, Nvidia’s best month in nearly six years.

The reasons for the gains in some other stocks are weaker. Holdings Inc., which uses artificial intelligence to help clients analyze data, saw its shares rise nearly fivefold last month. BuzzFeed Inc., a media company cutting costs amid a decline in digital advertising, jumped more than 300% in two days last week after its chief executive officer pledged to make AI-inspired content part of its “core activities”. Inc., another software maker that counts Raytheon Technologies Corp. as a client. and Baker Hughes Co., rallied a record 77% last month.

Baidu Inc., China’s largest search engine company, is also jumping into the fray. The company plans to launch a chatbot service similar to ChatGPT, according to a person familiar with the matter, although the news did not lift its share price this week.

Until the bubble bursts, O’Rourke said he wouldn’t be surprised to see companies adding AI to their names or a jump in secondary stock offerings as management looks to capitalize on the euphoria.

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“It’s still early stages,” he said. “For all the names and tickers that are moving now, there will probably be three times that in a month.”

Technical chart of the day

Recent investor optimism for technology stocks has helped push the Nasdaq 100 above its 200-day moving average. It’s a key measure of long-term momentum, and the tech-heavy gauge has traded below it for 203 consecutive sessions, its longest streak in about two decades. The index is up nearly 11% this year, but Wednesday’s Federal Reserve rate and a series of earnings from a major tech company will show whether that rally will moderate.

Top tech stories

  • Intel Corp., grappling with a sharp decline in revenue and earnings, is cutting executive pay across the company to deal with a shaky economy and preserve cash for an ambitious turnaround plan.

  • Snap Inc. is reporting its first quarterly revenue decline, citing a slew of changes to Snapchat’s ad products that could be disruptive to the social media app’s business.

    • Snap has convinced more than 2 million users to pay for special features on its Snapchat social media app, known for its disappearing messages and face-changing filters.

    • Last year was the toughest in history for businesses that depend on digital advertising. Snap says the pain is subsiding. “It looks like advertising demand hasn’t really improved, but it hasn’t gotten significantly worse either,” Chief Executive Officer Evan Spiegel said on a call with analysts on Tuesday.

  • Advanced Micro Devices Inc., the second-largest maker of computer processors, gave a better-than-expected first-quarter sales forecast as gains in the lucrative server market helped offset a drop in demand for computer chips.

  • SK Hynix Inc. insisted on plans to halve capital spending in 2023 after reporting its biggest quarterly loss on record, driven by a historic slump in the chip industry.

  • OpenAI, which released the viral chatbot ChatGPT last year, has unveiled a tool that it claims will help show whether a text was written by an AI program and passed off as human.

  • Shares of Electronic Arts Inc. fell after the video game maker posted a disappointing quarter for the current quarter due to a six-week delay in the release of its highly-anticipated next Star Wars game.

  • Western Digital Corp. receives a $900 million investment led by Apollo Global Management Inc., adding financial strength during difficult times for the memory industry, which could see further consolidation. The stock fell 6% in late trading on a disappointing revenue forecast.

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–With help from Subrat Patnaik and Matt Turner.

(Correct the seventh paragraph to show that’s profit was last month.)

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