Artificial Intelligence
At the beginning of June, Goldman Sachs research indicated that all of the return for the S&P 500 year to date through May was attributed to just seven stocks; the other 493 stocks in the S&P 500 have an average return of zero, nada, zilch. How did that happen?
It started as reversion to the mean, but as we moved into the month of May, something else started to take over…something that is certainly artificial, but is it intelligent?
AI has become a mania. I am no technology expert, but I do know a little about how the market reacts to technological breakthroughs. The market response is a phenomenon called the Gartner Hype Cycle. It begins with a technological trigger, and we move to the peak of inflated expectations as early publicity leads to grossly exaggerated claims of potential. Then we enter the trough of disillusionment: Technology is never adopted as quickly as the zealots believe it will be, and when the fantastic predictions fail to materialize immediately, bubbles burst. That leads to the slope of enlightenment – Technology is never adopted as quickly as zealots believe, but it is adopted faster than naysayers would suggest. People start to see realistic applications, and these realistic applications eventually lead to the plateau of productivity, where the new technology is being used to make our lives easier – not as first imagined, but in real ways nonetheless.
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