Artificial intelligence stocks rise on ChatGPT hype

Small AI group stocks have soared this year on hype surrounding ChatGPT and other generative AI models, prompting analysts to warn of a looming “bubble”.

Last year was a breakthrough year for AI, which can provide fluid text answers to questions, craft poetry and stories, and generate images on demand. Microsoft hopes to use the technology used in OpenAI’s ChatGPT chatbot to overthrow Google’s dominance of the internet search market. Alphabet hopes its own conversational AI service, Bard, will keep users from abandoning ship.

Big Tech’s embrace of generative AI has generated frenzied interest from investors. BuzzFeed stock soared 150 percent in one day in late January after CEO Jonah Peretti said “AI-inspired content” would appear on the company’s website later this year.

Generative AI technology is showing “all the usual hallmarks of the hype: social media echo chambers, exponential risk funding and polarized media,” Morgan Stanley analysts said. “During our trips across the US last week, ostensibly to discuss decarbonization and reshoring, conversations regularly turned to ‘And what do you think of ChatGPT?'”

US companies offering all kinds of AI-related services are reaping the rewards.

SoundHound AI, which specializes in speech-to-meaning technology, is up 94 percent so far this month. Shares of C3.ai and BigBear.ai are up 103 percent and 561 percent, respectively, year-to-date, though both remain well below all-time highs set during the stock market bull run that started in 2020.

Such groups have quickly become popular with individual investors who have invested in equities recently as global economic prospects improved. Data provider VandaTrack said this week it expects “continued speculative activity” in AI-related stocks as long as macroeconomic conditions remain benign.

ChatGPT in particular has caught the public eye, attracting around 100 million monthly active users in January, according to UBS, after launching the previous month.

“In the 20 years since the internet, we can’t remember a faster ramp in a consumer internet app,” the bank said. “It took TikTok nine months from its global launch to add 100 million additional users, and Instagram took 2.5 years.”

Still, some investors, burned by last year’s sharp sell-off in once-high blockchain and Web3 stocks, are wary of betting on the latest fad. Alphabet’s shares fell nearly 8 percent after Bard gave an ambiguous answer to a question about images taken by the James Webb Space Telescope last week.

Others worry about what the technology could mean for jobs. “Replacing brains with a machine will do for middle-class jobs what replacing muscles with a machine did for working-class jobs: a lot will be destroyed and what’s left will have to be either very skilled or very unskilled,” he said Rabobank.