The AI Debate You'll Want to Hear

Almost the same story, different day... Debunking an old Wall Street adage... What to make of the artificial-intelligence buzz... What we said three years ago... People care more now... Bubble or not?... The AI debate you'll want to hear...

We could almost do a copy-and-paste job from yesterday...

Almost.

The major U.S. indexes were again up across the board – with the U.S. benchmark S&P 500 Index almost 1% higher – at least in part because the producer price index ("PPI") report for June was published this morning.

This set of economic data reflects wholesale prices paid by businesses... whether they're rising or falling, and by how much. It's thought of as a leading indicator of inflation trends, since the prices producers pay can take time to be passed through to consumers.

Yesterday, the consumer price index ("CPI") for June came in slightly below Wall Street expectations, putting enough investors into a celebratory mood. Today appeared to be the same deal with the PPI, which registered growth of 0.1% in June... half of what economists were thinking.

So prices are rising more slowly than expected, both those paid by people and by businesses that make and sell things. (They're always rising somewhat thanks to a fiat-currency system, but the pace is what investors are interested in today.) Put that together, and you get what we saw in the markets the past two days: Nearly everything – stocks, bonds, gold, bitcoin – has been up, except the U.S. dollar.

It feels like the opposite of 2021 and early 2022...

That's when CPI and PPI numbers kept climbing by more than Wall Street was expecting. That caused investors to determine that the Federal Reserve would eventually raise interest rates and slow the pace of higher prices, which it did.

If the official inflation numbers keep falling by more than expected now, it could mark a growing belief that rate hikes are near their end. Whether that is actually the case is another discussion. Today, I (Corey McLaughlin) am telling you what we see.

We're always going to take "official" government data with a heaping dose of skepticism. And we'll also again note that the Fed purports to look at another inflation metric – core personal consumption expenditures, which is at 4.6% annual growth at last check... showing stickier inflation than PPI and CPI may indicate.

Nevertheless, enough people with enough money in the markets care about the data published this week. Party on.

One thing is for sure...

The "sell in May and go away" crowd is missing out...

I bring this up mostly to make a point that certain popular Wall Street adages can often be absurd and not worth listening to. Think for yourself instead.

There's truth to some sayings, such as "don't fight the Fed." But blindly following antiquated phrases turns out to be precisely the wrong decision.

Take "sell in May and go away." This has roots in the idea that pre-Internet Wall Streeters might have been inclined to sell positions at the start of the summer, so they wouldn't have to worry about ruinous losses striking while they're away from their desks on vacation.

If that's conventional wisdom, it was no good this year. The S&P 500 is up about 8% since May 1, and the tech-heavy Nasdaq Composite Index is around 15% higher.

You can trade from virtually anywhere there's an Internet connection now. And more common than selling for the summer is using artificial-intelligence ("AI") programs to make trades. Whether a human trader is around or not, these AI traders know how to respond to price movements, a report like the CPI or PPI, or even the words of an important speech.

Speaking of that...

We've mentioned the recent buzz about AI a few times this year...

We've warned against getting swept up in any euphoria around it, but we've also noted that the technology will likely transform the way many businesses operate, how people work, and what skills are valued in the years ahead.

This isn't a new discussion... The potential of AI has been talked about for years. But the development of tools like a new version of ChatGPT earlier this year reignited the story for a lot of people and created more bullishness around AI.

I first wrote about GPT-3 technology back in a September 2020 Digest titled "A Robot Wrote This"...

Developed by San Francisco-based company OpenAI, GPT-3 has been "trained" on billions of bytes of data... including e-books, news articles, and Wikipedia. As directed, it takes a prompt... and attempts to complete it.

We then shared a story of a college computer-science student who directed the technology to write a series of essays with some degree of success. (Fortunately, they required editing like the human version, so we weren't worried about it putting us out of a job.)

And in 2020, we also noted the growth opportunities for AI...

We shared the story about a "robot writing an article" not to scare anyone, but to simply point out that "AI has arrived," saying...

You can be optimistic or pessimistic about these technologies changing the way a lot of people do business and perceive the overall job market... But no matter your stance, it wouldn't be wise to ignore these trends completely.

Some of the biggest companies in the world – and highest-returning stocks – are investing heavily in this space... And our editors have been tracking the developments for years.

In that September 2020 essay, we mentioned Stansberry Venture Technology editor Dave Lashmet calling AI "artificial brains"... and how he'd first recommended owning shares of Nvidia (NVDA) – now an AI poster child – back in May 2016, when it traded for roughly $45 per share. That recommendation – since closed with a weighted gain of more than 600% – now appears in our Stansberry Research Hall of Fame.

Back when Dave initially recommended Nvidia, the chipmaker was known mainly for making graphics cards for video-game systems. But by 2020, it was already making technology with "lots of deep learning capabilities too," Dave told us. As we wrote that year...

A lot of folks don't realize that "deep learning" technology, a kind of machine learning, goes hand-in-hand with microchips...

For instance, Nvidia's RTX 3080 chip uses algorithms to predict where light rays should be on a gamer's screen... and it does it at twice the speed of the chips used in Sony's new PlayStation 5 and Microsoft's Xbox Series X gaming consoles.

As Dave told us of this new Nvidia chip, "It's both a video game story and an AI story." This new chip allows 4K gaming at very fast refresh rates – 90 times per second, which is faster than the human eye can see.

And the very same idea of "deep learning" has a wide variety of applications, which makes its potential market massive. Dave says these technologies could be used for content creation, as the "robot article" shows, as well as for something yet unimagined or totally unrelated – like driverless cars...

We also talked about how a longtime favorite company of our Dr. David "Doc" Eifrig – Microsoft (MSFT) – had just lost out on securing the underlying code to social media platform TikTok... but may have made out better with a recent exclusive license deal with OpenAI for GPT.

That said, the primary feedback I received three years ago about AI was along the lines of "move on to something else." My, has that tone changed now. Everyone wants to talk about GPT and AI now. And so we are again, too...

The AI debate you'll want to hear now...

We've received countless questions about the AI craze. And next Wednesday, July 19, we've put together a special event to give you our full and unbiased answers.

In this free event, Doc is going to sit down with 50-year Wall Street veteran Marc Chaikin, the founder of our corporate affiliate Chaikin Analytics, to debate the latest buzz around AI and what to make of it.

Is this just the latest tech bubble? Or will AI really change the world and the economy for decades to come? And, importantly, what does AI mean for you and your money? Doc and Marc plan to cover all of these topics in what we expect to be an enlightening discussion.

As Doc says...

Marc and I have very different investing philosophies. But I asked Marc to join me because he's spent decades on the leading edge of applying new technological breakthroughs to the field of finance.

Not to mention, Marc has a higher-level understanding of systems and neural networks than anyone else we know of.

As Doc's alluding to, Marc has created several different technologies and indicators that are used by some of Wall Street's biggest firms today. He also happened to use them to predict the COVID-19 crash... the market bottom in March 2020... and a "bullish personality shift" in stocks late last year.

In other words, expect to get some useful market analysis with the AI talk as well.

As Doc says, if you've given any thought to investing in the AI sector, or simply wish to become better informed on this subject so you can educate your friends or loved ones on what's really happening, tune in to this event on Wednesday, July 19.

It's 100% free to tune in, and we urge you to. This is the first time Doc and Marc will share a stage, and they are two of the brightest investing minds we know. We just ask that you sign up in advance so you don't miss anything. You can do that here right now.

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In today's mailbag, feedback on a note in yesterday's Digest about the U.S. government spending 10 cents to make every new nickel, and apparently losing $51 million a year because of it (and the 2.7 cents cost per penny made, too)... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"In Canada, we got rid of the penny coin a few years ago. All pennies were collected and melted down as a useful alloy. Transactions were rounded down or up to the nearest nickel. The public got it right away and it created no disruption whatsoever. Why can Congress not enact that in the U.S. also?" – Subscriber Gerd S.

All the best,

Corey McLaughlin
Baltimore, Maryland
July 13, 2023