Who Will Win the AI Wars?Feb 13, 2023
Every Friday we host a live 1:1 discussion at 12pm EST.
This gives you the opportunity to ask us any questions you have on the markets, the economy, crypto, and more!
Here are the 4 key things we went over:
The AI battle between Microsoft's ChatGPT vs. Google's Bard
- Why Mark Zuckerberg is being forced to pivot away from the Metaverse
How this new front in search massively impacts Amazon
Why the huge glut of Super Bowl betting is a good sign
And if you're too busy to listen to the entire recording, below we included a compact summary of what went down.
To get all the juicy details, just listen to the entire recording. And now, onto the summary.
Frankly, we're really excited to finally not be talking about Jerome Powell and Inflation.
Sure, there's a huge report dropping tomorrow with massive market implications, but we've got more important things to discuss.
We're finally seeing growth and innovation come back to the forefront of tech with Microsoft and Google getting into a scrum over AI-based search.
Meanwhile, Meta is finally getting back on track by simply letting their metaverse ambitions fade into the background.
All of this is going down with the backdrop of hopes that inflation is slowing down faster and faster -- which will fuel more bullish sentiment in the larger market.
Finally, the battle lines for 2023 are drawn and we're beginning to see some of the narratives that will define this year.
Frankly, we're just thankful that it looks like we won't be spending a year talking about Jerome Powell and the Federal Reserve.
There's a lot more to cover here, so let's dive through the details 👇
Google Vs. Microsoft: Who Wins?
The market is in full overreaction mode now that Microsoft has launched a version of Bing with ChatGPT integrated natively.
AI search is the first, lowest-hanging fruit to fall as the market tries to commoditize chat-based AI and all the hype surrounding these large language models.
Of course, the big headline last week was Google botching their release of Bard, their response to ChatGPT, while Microsoft soared on short-term tailwinds created by them getting AI integrated into their search functionality so early.
Google's stock dipped as much as 10% during the week, which is why we pivoted to open a position in Alphabet finally.
Read our article for more, but the essence here is that ChatGPT doesn't pose that much of a threat to Google long-term.
Microsoft and ChatGPT are first to the party for AI, but most estimates put ChatGPT as being hilariously expensive to manage -- with an average cost-per-query of $0.02. That's an untenable cost that will catch up to Microsoft at some point.
But, in reality, both MSFT and GOOG are poised to win off the back of this.
First of all, Microsoft only needs to increase its search revenue by 10% to see really astronomical wins on its balance sheet.
That kind of growth for MSFT would barely dent Google's overwhelming dominance of the search market. Alphabet stock is only down because ad spend is down overall. As soon as the economy starts pushing forward with a little more confidence -- Google will get revenue growth back on track even if they have to cede territory to Microsoft.
Meanwhile, Google's cloud revenue is on the rise as well -- helping offset any search losses.
Truly the only real loser here is Amazon, whose dominance in the cloud is not as valuable as it once was while its struggling e-commerce business keeps clouding over incredible cloud profits.
Meanwhile, Meta has spent the past few weeks quietly surging as much as 30%. This isn't because the market is starting to like the metaverse, but it's because Meta is slowly backing away from mentioning its metaverse ambitions.
This is great because spending was absolutely out of control in 2021 and 2022 at Meta -- with some projections showing that Mark Zuckerberg was on track to spend as much money on developing the metaverse as the entire United States did developing the Apollo program that landed on the moon.
This was obviously untenable -- especially with the market going sideways all through 2022. So we're really excited to see Meta continue its "year of efficiency" theme.
Meta is already starting off this week strong with another reported round of layoffs.
The central business at the heart of Meta is still an astounding money-printing operation -- it's just a matter of maintaining that efficiency and focusing on that business.
2023 is very much a year where these tech giants break the mold.
We're seeing the completely entrenched niche, that is search, get completely upended, and hopefully, we'll also see Meta disrupt the short video space and take market share back from Tiktok as they iterate their way to a version of Instagram that can go toe-to-toe with that short-video powerhouse.
Wrapping this Up:
The main thing we're watching this week coming up is the Fed report on Tuesday.
We're really hoping for an acceleration of the disinflation process that Jerome Powell says is already starting.
We're seeing troubling signs coming out of warehousing rates and shipping, an interesting echo of the supply chain shocks of 2020, but that could very easily be short-lived.
More and more, we're watching optimism and bull sentiment creep back into this market.
We've got a really long road ahead, and investors should still be cautious. But we're starting to see more positive signs than negative ones.
We're really excited to watch how the macro environment develops in the back half of this quarter.
Whatever happens, we'll keep you posted as quickly as possible. Gear up for a wild ride, y'all!