- In July and August of the past year, I explained the world had entered an AI and tech gold rush. Enormous amounts of money were pouring into building computer models that could extract and interpret golden data.
- Since that time, the number of AI miners and camp followers has exploded, making AI or Nvdia names that even your grandmother knows.
- In those articles, I cautioned that I believed the AI miners would find golden data, but how much of it they would find and how much investors would be willing to pay for it were big question marks.
- The other reality that I saw was that, with AI, we are in the mining phase, not the golden-products phase. No single product or service stands out at present as the game-changing prototype of things to come.
This past week, a more ecnomical Chinese DeepSeek model caused lots of wild gyrations of most tech stocks. Net, net the tech market ended down only 3-4%. On the surface, DeepSeek, which costs a fraction of that of an NVDA, chip would seem to be a category crushing piece of software.
That many big techs rose sharply, such as GOOGL, AMZN, and Meta reminds us of what stage we are traversing in the gold rush. In short, those stocks rising clearly suggest that we are in the mining stage of the gold rush and not in the ingot stage.
AMZN may be the biggest benefactor of the AI gold rush of any stock in America. They have millions of employees, millions of products, thousands of warehouses, millions of delivery miles worldwide, and billions of customers. If a better, more efficient, and less costly means of doing business is not in AMZN's future, AI will be the biggest bust since Beany Babies.
Other giant benefactors of AI will be WMT, COST, the banking and insurance industries, and the industrial sector. If industrial sector companies like Raytheon, Caterpillar, Honeywell, 3M, and GE are to 'reshore', jobs from overseas, they must extract enormous costs from domestic manufacturing. My guess is they can do it, but it will take years, maybe decades, to get it done.
I believe DeepSeek will ultimately be viewed as a boon to the AI industry. It reduces the cost of participating in the AI gold rush and broadens the number of institutions and people who can afford to play.
Greg Donaldson is the author of "The Hidden Power of Rising Dividends: How to Produce Security, Income, and Growth." The book is available on Amazon and at your local book store.
This article is not intended as investment advice. You should seek an investment professional's views before making any investment.
These views I have shared here are my own and not any company I am associated with.
