Understanding the AI Wave: Your Guide to the 2024 Landscape
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In 2022, when ChatGPT was introduced by OpenAI, it sparked what can only be described as an AI revolution.
Initially labelled as a "low-key research preview," it quickly amassed over 180 million users, reshaping conversations around artificial intelligence and igniting a fervour among investors eager to capitalise on its potential.
One standout in this frenzy has been Nvidia [NVDA], whose stock soared over 200% in the past year, riding the wave of AI adoption, especially in data centres.
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What does the significant rise of AI tech, and its use among the general population, mean for investors? And how can you capitalise on AI to boost your Wombat portfolio, and reach your financial goals?
Let’s start by exploring AI in more detail.
🔌 Electricity-Hungry Data Centers: The Next Big Challenge
As the semiconductor-chip shortage highlighted in 2023, the AI boom isn't without its challenges.
Dan Hendrycks from the Center for AI Safety predicts that in 2024, electricity demands will take centre stage. Data centres, essential for AI operations, already consume a significant portion of global electricity, with AI accounting for about 20% of their capacity.
Expect this to rise as AI systems demand even larger computational power.
🧠 Building Bigger Models: The Race for Superior AI
Google DeepMind's unveiling of Gemini Ultra in December 2023 marked a milestone in AI development, showcasing the growing trend of creating larger and more powerful models.
These advancements promise better-performing AI applications, although the leap might not be immediately apparent to users.
OpenAI's Sam Altman likens the anticipation around new AI models to the excitement of iPhone releases. And we all know how that’s going.
📈 Who's Riding the AI Wave?
Beyond Nvidia, a slew of companies are integrating AI into their products and services. Salesforce [CRM] and Microsoft [MSFT] are pioneers in this space, with the latter embedding its chatbot Copilot into Microsoft 365.
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Even companies like Wendy's [WEN] and Walmart [WMT] are leveraging AI to enhance customer experiences. Morningstar analysts categorise the AI landscape into generative AI, AI data and infrastructure, AI software, and AI services to aid investors in navigating this burgeoning sector.
💡 The Gold Rush Analogy: Investing in AI
Just as the gold rush of the mid-1800s presented opportunities beyond mining, the AI boom offers avenues for investors beyond direct AI companies.
Nvidia's success underscores the importance of investing in the infrastructure supporting AI development, akin to selling "picks and shovels" to miners.
As demand for AI accelerates, cloud computing companies and the chip supply chain stand to benefit, with Nvidia leading the charge.
In essence, the AI boom of 2024 represents a paradigm shift in technology and investing. While the road ahead may present challenges, the opportunities for growth and innovation are unparalleled.
As investors, understanding the dynamics of this landscape and identifying the "picks and shovels" of the AI gold rush could prove to be the key to unlocking substantial returns in the years to come.
You can invest in the AI boom through some of our most popular ETFs on our Standard GIA/ ISA Account or as fractional shares. Please note, some of these companies are only available on the Instant Account.
Remember, your capital is at risk when you invest. Past performance is not an indicator of future gains.
The AI, featuring Nvidia, Trimble, and Apple
The Techie, featuring Google, Intel, and Microsoft
The Robo, featuring Tesla, Samsung, and AMD
The Gamer, featuring EA Sports, AMD, and T2
