“Phil, what do you think is the most exciting part of the artificial intelligence (AI) revolution occurring in the markets?”
I get this question a lot…
First of all, it is exciting.
It’s an amazing time to witness the development in the AI space and the endless possibilities it promises when it comes to enhancing our lives and productivity.
However, the above isn’t how I respond to that question.
My thoughts are far more prosaic and drier than that.
My reply is always: “it’s not what I think about AI that matters… it’s what governments think about it.”
That’s usually elicits a smile or an awkward shrug. It’s as if people are thinking, “Oh, Phil doesn’t really understand this new technology.”
Well, dear reader, it appears poor Phil does understand this market…
Let the Government Tell You Where to Invest Your Money
One of the true drivers of the 18.6-year real estate cycle is chasing unearned economic rent. The very reason why it repeats reliably every 18.6 years is because society allows these gains to be privatized and then have credit created against them via our banking system.
Well, when you buy land under your name, you’ll receive a land title deed. Another word for it? A government-granted license.
Source – wired.
This is what’s being proposed for AI-exposed companies basing their future earnings on mastering general AI.
Here’s the story behind this from the above article (emphasis is mine):
The US government should create a new body to regulate artificial intelligence—and restrict work on language models like OpenAI’s GPT-4 to companies granted licenses to do so.
That’s the recommendation of a bipartisan duo of senators, Democrat Richard Blumenthal, and Republican Josh Hawley, who launched a legislative framework yesterday to serve as a blueprint for future laws and influence other bills before Congress.
It didn’t surprise to me to read this.
Look at the most disruptive technology of the last 10 years, cryptocurrency… Cryptos had the rug pulled from under them, and their prices have retreated dramatically.
Why? Government regulation aimed at that industry.
Frankly, though, it was needed. The crypto space was beginning to resemble the wild west. Too many people were being hurt by fraudulent and criminal behavior.
So when AI is on the verge of going mainstream, seeing the U.S. government step in isn’t all that surprising.
And what do I think will be the outcome of this? Will AI suffer the same fate as cryptos and see the hype balloon deflate?
It’s the opposite… I believe it is one of the very best investments one can make!
Here’s Another Investment Tip…
This is one of the most underappreciated tips I can provide you with.
When the government steps in to regulate free markets, try to identify the winners and invest in them.
And don’t invest against the trend.
The reason is simple. If I knock on your door and tell you I’m taking you to court because I believe your house belongs to me, you’ll always win.
You will hand over your deed to the courts as proof of ownership. That deed is backed by the sitting government.
It is incontestable.
Now, simply apply that logic to these AI companies.
These companies will now position themselves accordingly to ensure they comply with every one of those proposed pieces of legislation. I guarantee you they will lobby to get special concessions just for themselves.
In the end a few winners will emerge who, thanks to their government-granted license, can and will eliminate all competition that threatens their market share.
In effect, they will create a monopoly (or oligopoly, where a few dominant players control most of the market share) in this area of technology. Something I like to call a “moat” that surrounds and protects their interests and those of their shareholders.
And thus, they will emerge as the true winners in AI.
So who could they be? From the above-quoted article:
A day later, senator Chuck Schumer will host the first in a series of meetings to discuss how to regulate AI, a challenge referred to as “one of the most difficult things we’ve ever undertaken.”
Tech executives with an interest in AI, including Mark Zuckerberg, Elon Musk, and the CEOs of Google, Microsoft, and Nvidia, make up about half the almost-two-dozen-strong guest list.
That’s as good a place to start as any.
All that’s left to do then is interpret their charts to tell you beforehand who stands to win from this.
And as members of my newsletter The Signal know… new highs are one of the easiest and best tools for reading charts.
Editor, Cycles Trading with Phil Anderson
P.S. The new highs list is one of my favorite tools in my “Money Almanac.” It’s the system and strategy I’ve put together over 30 years of research and through my own personal investing.
My “money almanac” has let me call – and profit from – every market move in the past 30 years. And now, my goal is to teach everyday investors how to use it for themselves. Check it out right here.