Editor’s Note: After last week’s DeepSeek-driven flash crash, the AI mega trend has been called into question. Today, Chief Investment Strategist Adam O’Dell explains how we got to this point and why it’s not all doom and gloom from here. Read on…
I still remember the day I heard about a crazy new website called “Amazon”…
This was back in 1999. A close friend was raising two young kids, and he’d just started shopping on the internet to save some time.
He was ecstatic about how much time he was saving. And he was blown away that he could tap a few keys on his computer … then have his purchases delivered to his doorstep about a week later.
Of course — Amazon was little more than a glorified bookstore back then.
This was about a decade before Apple would release its first smartphone. Only about a third of Americans even had a cell phone.
Only 12% had internet access.
These were the early days of the internet revolution.
And even though folks like my friend could tell there was some value to the new technology — no one would’ve guessed how much it would ultimately transform our lives.
Amazon is now a retail juggernaut, second only to Walmart, with $1.4 billion in daily sales revenue.
Tech juggernauts like Google, Facebook and Netflix have emerged to create trillions of dollars in market capitalization and make unprecedented fortunes for faithful investors.
As of 2024, internet businesses account for one out of every ten dollars made in America.
But back in 1999 or 2000, it was impossible to know just how diverse and profitable this new technology would become.
Now, we’re right back in that same position…
Thanks to a new kind of emerging technology — called artificial intelligence (AI).
Now the REAL Fun Begins for AI Investors
With the launch of ChatGPT on November 30, 2022, the first phase of the AI revolution was off to the races.
ChatGPT was the first “killer app” of the AI revolution. It put the power of large language models (LLMs) into the hands of everyday internet users, and people loved it. The site reached 100 million users in just two months, proving there was clearly a market for AI-powered tools.
A handful of mega-cap tech companies were clear frontrunners in this race since they already had a head start. These stocks are the “Magnificent Seven,” which saw their shares soar steadily through 2023.
Well, the initial “hype” phase of the AI boom seems to be cooling off.
Much like the internet boom of the early 2000s, consumers and investors are getting over their initial sense of awe and excitement and are now trying to find real value in AI.
Some investors are finding that value in the hardware that will power the AI revolution.
Nvidia (NVDA) has a clear advantage since it’s the world’s leading manufacturer of graphics processing units (GPUs).
As the name implies, these GPUs are crucial for creating graphics, video and images — rendering the visual effects we see in Hollywood blockbusters and our favorite streaming shows. They’re also critical for 3D modeling, architectural design and dozens of other real-world applications.
Of course, Nvidia’s chips are now so coveted because they’re responsible for running intense AI models like ChatGPT.
GPUs use a process called “parallel computing” to make the magic happen. It involves thousands of individual cores working in sync to complete massive computations simultaneously.
That’s why investors have piled into NVDA stock, presuming these GPUs were the ultimate “picks and shovels” play for the new AI revolution.
But then last week, DeepSeek dropped a bombshell on the AI mega trend — revealing their own competitive AI LLM built at a fraction of the cost and with a fraction of the hardware.
This forced investors to recalculate, dumping over $600 billion in NVDA shares and leading to the worst single-day performance of any stock in market history.
That catastrophic “Black Monday” was just the beginning of a whole new phase in the AI revolution.
I don’t have the room to explain it all here in today’s article, so just watch my FREE video presentation on the “AI Crash Summit” by clicking here now.
To good profits,
Adam O’Dell, CMT
Chief Investment Strategist, Money & Markets