Trouble brewing in AI paradise, Google's ‘Game of Thrones’ moment and interest rates might just stay higher for longer
Welcome to this week’s Market Pulse, your 5-minute update on key market news and events, with takeaways and insights from the Sidekick Investment Team.
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Our stories this week:
It’s important to note that the content of this Market Pulse is based on current public information which we consider to be reliable and accurate. It represents Sidekick’s view only and does not represent investment advice - investors should not take decisions to trade based on this information.
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1) Trouble brewing in AI paradise
Stability AI, the UK based AI startup behind the popular image generator Stable Diffusion, was an AI darling not too long ago. But they are currently facing severe financial difficulties and seem to be struggling to find a viable business model. After a wave of departures of senior executives and researchers, and calls from a key investor, the CEO, Emad Mostaque, recently resigned[1].?
Events at Stability AI potentially point to potential trouble on the horison. If more AI unicorns run into trouble down the line, it could severely dent demand for high end GPUs, impacting companies like Nvidia, AMD and Intel. If some of these startups follow Stability AIs playbook and resell their compute resources, it could disrupt supply and demand in the cloud computing market and by extension existing players like AWS, Azure and Google. We’re keeping a close eye on developments.?
Note: We own Nvidia, Intel, Amazon, Microsoft and Alphabet in our Flagship Strategy.
2) Google: Having a ‘Game of Thrones’ moment
Previously we’ve written about Google and how its push into Generative AI has hit a few rough patches. Recently current and former Google Execs revealed what they believe part of the problem might be. Product innovation at Google is being slowed down by cultural and organisational dysfunction that has split the business into competing factions, Game of Thrones style.
But there are encouraging signs that things are changing. Sundar Pichai has stepped up and now makes many of the day to day decisions that relate to AI products. One employee said he is the de facto ‘chief product officer for AI’. He also appointed Elizabeth Read, who previously worked on generative AI search experience, as the head of the entire Google search division. These seem like decisive steps towards a more nimble Google that can experiment, take risks and compete more effectively in the fast moving AI landscape[2].?
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Note: We own Alphabet in our Flagship Strategy.
3) An interest rate rollercoaster
Recent US inflation data potentially threw a spanner in the works for rate cuts in 2024. This is now the third consecutive month that US inflation came in hotter than expected and this has big potential implications.?
Stubborn inflation can have other consequences too. Republicans in the US were quick to blame higher inflation on current president Joe Biden's policies. While recent polls suggest the race between president Joe Biden and former president Donald Trump are tied, this could quickly change if inflation keeps going the wrong way, potentially increasing the chances of another Donald Trump presidency. The stakes are high and we are keeping a close eye on developments[3].?
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Notices
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