The rise of artificial intelligence (AI) companies has the potential to trigger another dot-com boom, according to a fund management group, but it could look very different to one seen in the late 1990s.
Andrew Macken, chief investment officer at Montaka Global Investments, discussed which firms would be the winners and losers from developments in the AI space.
Asked if he felt AI had the potential to trigger another dot-com-style stock market boom, he agreed but clarified it would feel different to boom of early internet companies that occurred in the late 1990s.
“There’s potential but it will probably look and feel a bit different,” he said.
“Today, for example, we see some AI-related stocks that look overvalued due to the hype. We also see some AI leaders including Microsoft, Amazon, and Meta, that look substantially undervalued.”
Shares in Meta had risen 117 per cent since the start of the year while Microsoft, which had developed its own rival to ChatGPT, was up 40 per cent and Amazon was up 46 per cent.
Microsoft and Amazon, which uses AI in its Amazon Web Services offering, both have optimistic outlooks with Macken describing how “the rally has a long, long way to go” for the two firms and Alphabet is also another winner, although it risks impacting the profitability of its core search business. Like Microsoft and Amazon, shares in Alphabet had also risen by 41 per cent year to date.
While these are all US stocks, Macken felt Australia was a in better position to benefit as a country than the US as political parties are more likely to agree on how it could be utilised in society.
“I think Australia has an enormous opportunity here, enabled by our healthy democracy and functional working relationship between the two major parties. Australia has a really good shot at capturing the best of what AI has to offer, while mitigating the dangers, and supporting its society through the change,” he continued.
“So our sense is that this transformation is going to split winners and losers in a much more definitive way than the dot-com boom did 25 years ago.”
These losing firms include those that charge high fees for services that could now be provided by AI instead or those that are slower than competitors to move to AI.
“Last month, for example, a business in the US called Chegg, an online educational platform that assists students with their homework, told investors they now believed ChatGPT was having ‘an impact’ on new customer growth — and not in a positive way. The stock basically halved in a day. There will probably be a lot more of these situations over time,” Macken said.
“Losers will also likely include businesses that refuse, or are slow, to adopt these new tools and evolve their business processes.”
