As money managers game their approach to artificial intelligence-associated stocks such as Nvidia Corp. and Advanced Micro Devices Inc., they’re trying to forecast how technology like ChatGPT will reshape the nature of their work.
The Santa Clara-based Nvidia — which to date produces the lion’s share of hardware used by generative AI-producing companies like ChatGPT owner OpenAI — has seen its stock rise to $387.60 a share as of June 12, an increase of 171% year to date. The result seems particularly exceptional given the year-to-date performance of tech stocks generally, which have seen a trend downward since January 2022.
ChatGPT, which is the fastest-growing consumer software in history according to a January 2023 report by Reuters, is an artificial intelligence chatbot trained with Generative Pre-trained Transformers (GPT) and fine-tuned through user input. The program and generative AI like it are packed with information on almost any subject and can already answer most questions a user can pose to it. Though in its current state the program sometimes offers answers riddled with inaccuracies (or just bad advice), the developers behind ChatGPT say future iterations will resolve these issues.
Money managers in the San Fernando Valley expressed skepticism at the upward trend, while noting it could very realistically continue for months or longer.
“It seems like more companies are slapping their name on the bandwagon. … It wouldn’t surprise me if that continues for a few more years,” said Jeff Sarti, chief executive of Agoura Hills-based money management firm Morton Wealth, who noted that Nvidia’s valuation had recently surpassed $1 trillion. “But we’re not going to play that game, which feels entirely like speculation, even if it will be a natural beneficiary of the fact that it (Nvidia) is trading at hundreds of times its earnings.”
Sarti said investors acknowledge the tremendous potential and capability of AI but remain cautious given precarious recent hazards such as interest rates, inflation and the stiff market for tech stocks in the U.S. market as of late, and for pioneering tech startups in particular.
“Undeniably from an investing point of view, it’s become similar to the dot-com era of the late ’90s, where the stock price has gone to the moon — the same with cryptos, the same with NFTs — and we’re seeing, without a doubt, signs like that,” said Sarti.
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While much has been made of generative AI’s potential in research, document preparation and even stock-picking in recent months, Sarti said he was reserving judgment on the impact AI will have on the money management industry, noting that over the years a number of supposedly revolutionary technologies have come and gone.
“Though it does seem like in this case, it seems like there are really more legs to it,” he said.
Several area money managers contacted for this story expressed a similar sentiment. The chief executive of a Westlake Village-based financial advisory firm, who asked not to be identified, said his team was taking a wait-and-see approach.
“There’s never a sure thing. There’s already a lot of data, a lot of third-party analysis in the areas we’re investing in,” he said. “Very, very large investment firms are going to jump right on it, but it’s too early to tell for the average company.”
Ryan Parker, the current president and soon-to-be chief executive of West L.A.-based money management firm EP Wealth Advisors, emphasized that, despite the tremendous prospects of generative AI, the industry would, as it always has, quickly adapt to maximize its value to the investor.
“Any business or professional service takes stock of the changing landscape of technology; to not do so is asking for trouble. In my 25 years in the industry, I’ve heard about all kinds of things that would render the financial advisor obsolete,” said Parker. “But the bar has been raised every year that I have been in the business in terms of what’s considered quality advice. Twenty-five years ago, the sign of quality was understanding how a bid-ask spread works and charging $50 on each transaction.”
Reza Zamani, chief executive of Woodland Hills-based financial advisory firm SteelPeak Wealth, offered a similar assessment, noting the answers currently offered by generative AI services like ChatGPT were already obtainable to a savvy search engine user.
“It’s similar to when Google first launched as a search engine; day one, it might have been a bit hard for companies to embrace,” said Zamani. “But quickly they understood the value for the client, and they learned.”
It’s not a question of whether the money management industry will utilize the technology, Zamani said, but how it will be utilized.
“I think we’re more in the embracing camp — the challenge is that it’s in the early, early stages. So it’s all about how we wrap our heads around how to embrace it,” Zamani said. “The short answer is, we embrace it. The longer question is, how do we embrace it?”