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Tuesday, February 7, 2023
It feels a little like 2017 in the market right now.
That was the height of the rush for companies to slap “blockchain” on their corporate name, or throw the term around in press releases hyping new products and partnerships.
This time, it’s artificial intelligence.
Take a tour of the Yahoo Finance trending ticker page right now (one of my faves), and chances are, you’ll find a company with “AI” in the name, or one that has just released a hot new product touting its use of artificial intelligence.
Exhibit A is BigBear.ai (BBAI). The provider of an “end-to-end data analytics platform operationalizing artificial intelligence and machine learning at scale” came public via SPAC in a transaction that closed on Dec. 8, 2021. The shares finished the session that day at $9.25. Today they’re trading around $5.50.
BigBear.ai doesn’t make money (of course). Its main customers are in federal government, including the Department of Defense.
When it announced earnings in November, it reported that revenue had risen 1.2%, and the newly appointed CEO, former IBM executive Mindy Long, focused on cost containment in a statement. At the time, BigBear forecast that 2022 revenue would rise by 3% to 16.8% — a wide range.
Now in 2023, just a few months later, the shares have risen more than 700% as the chatter around AI – and the public excitement around ChatGPT – has heated up.
This isn’t to pick on BigBear in particular.
Another de-SPAC, voice AI platform-maker SoundHound (SOUN), is up about 90% this year (and down more than 50% from when it started trading in April 2022).
Then there’s C3.ai (AI). (All of these “dot-ai” suffixes are reminiscent of the “dot-eth” craze that swept cryptobro Twitter handles over the past few years). Founded by software veteran Thomas Siebel in 2009, it’s a relative grandaddy. It didn’t IPO until December 2020, at $42 a share. It’s trading below $27 now, but has more than doubled this year, catching a particular surge after it released its “C3 Generative AI for Enterprise Search.”
The list goes on, as my colleague Ines Ferre highlighted last week. Not surprisingly, big tech has made sure to steer towards AI as companies like Microsoft, Meta, IBM, and Alphabet, touted their investments in AI on earnings calls. Yesterday Alphabet rolled out Bard, its ChatGPT competitor.
Even Buzzfeed (BZFD) is suddenly an AI stock after it said it would have bots write some of its posts.
This is all reminiscent of every hype cycle from railroads in the 1800s to the dot-com craze of the 1990s, from cannabis to meme stocks. Of course, we still use railroads, and we still use the Internet. But the initial hype machine turned out not to support the many, many players that sprung up.
AI could well be world-changing. Ark Invest’s Cathie Wood certainly thinks so.
Nina Schick, author of “The Era of Generative AI,” was similarly enthusiastic in an email to Yahoo Finance: “We’re on a cusp of an AI-powered revolution that will redefine the limits of human intelligence and creativity…Unlike the Metaverse which is a untested concept, AI is being implemented into existing systems now – as a software. Hundreds of millions of people will be interfacing with generative AI within months. The B2B market will explode!”
Whether the likes of BigBear and SoundHound will ultimately thrive is another question. For now, investors are buying first and asking questions later.
What to Watch Today
8:30 a.m. ET: Trade Balance, December (-$68.5 billion expected, -$61.5 billion during prior month, revised to -$90.2 billion)
12:40 p.m. ET: Fed Chair Powell Speaks
3:00 p.m. ET: Consumer Credit, December ($25.000 billion expected, $27.962 billion during prior month)
Assurant (AIZ), BP (BP), Chipotle Mexican Grill (CMG), DuPont (DD), Fortinet (FTNT), H&R Block (HRB), Hertz Global (HTZ) KKR (KKR), Prudential (PRU), Royal Caribbean (RCL), V.F. Corp (VFC), Western Union (WU)