The Gold-Medal Performance That Sent an AI Giant Soaring
This essay was originally published in DailyWealth Trader, a daily trading advisory, and has been adapted. To learn more about this service, click here.
Artificial intelligence ("AI") recently did what millions of students couldn't... It took the gold in the International Mathematical Olympiad ("IMO").
The IMO is just what it sounds like – it's the Olympics of math. Since 1959, the test has served as the ultimate competition for high-school math students.
Participants in the IMO come from more than 100 countries across five continents. More than 600 hopefuls took the test this year... and only 72 took home the gold.
But one of those medalists was a chatbot... from Google's parent company Alphabet (GOOGL).
And the success wasn't limited to just one AI system... A second chatbot from OpenAI, while not officially entered in the contest, also gave a gold-medal performance when answering the same questions.
This moment represents a sea change – and not just for high-school mathletes. Math-capable chatbots will open a new frontier in the AI bull run. And they're already causing a buying surge in one key AI stock...
AI Finally Solved Its Counting Problem
AI's prior problems with math can be boiled down to one word: "strawberry."
Last summer, major chatbots couldn't count the number of r's in "strawberry." Frontier AI models like GPT-4o and Claude falsely asserted the letter appeared twice. Take a look...
This counting problem lies deep in the chatbots' architecture.
Today's chatbots don't actually read or write raw text. That would require too much computing power...
Instead, they process information by breaking it into "tokens" – or small chunks of information.
The problem is that tokens aren't standardized. They can be words ("Hello"), syllables ("Hel" and "lo"), or even letters ("H," "e," "l," "l," "o").
But we can't predict how a chatbot will tokenize a concept. That's what gives us unexpected answers like the incorrect number of r's in "strawberry."
And this problem only cascades when it comes to math. Chatbots tokenize numbers incorrectly, too. This causes calculation errors as numeric relationships break down.
But with the recent victories at the IMO, Alphabet and OpenAI have solved the tokenization problem.
The answer seems to be time. OpenAI got its gold medal by allowing its model to "think" for much longer periods at a stretch. And Google DeepMind's model produced complete mathematical proofs over a four-and-a-half-hour test period.
We're just scraping the surface of AI's potential to change mathematics. But Google DeepMind researchers predict that the tech will be at the bleeding edge of the field in less than a year.
Alphabet's Rare Winning Streak Is a Bullish Signal
This is a major catalyst for Alphabet's AI business. And it recently sent the search giant's stock soaring. Take a look...
Alphabet caught a bid on July 9... and rallied for nine consecutive days after that.
It's extremely rare for Alphabet to go on a nine-day run like this. In fact, this was only the 10th time GOOGL had this long of a streak since going public in 2004.
However, these runs tend to act as great buying opportunities. Take a look...
Alphabet has been a great stock for buy-and-hold investors – returning 24% a year.
But we can juice that performance by buying after hot streaks like this recent one...
Similar setups have led to typical gains of 7% in three months, 15% in six months, and 28% in a year. In other words, we saw outperformance in every time frame.
What's more, Alphabet was up a year later in 80% of the cases tested. So this signal was reliably bullish, too...
If you have extra money to put to work, history says now is a great time to add Alphabet exposure.
AI recently took its first steps into complex mathematics. Get ready for a new rush into the sector as science industries adopt the technology...
And above all, make sure you're in a position to benefit.
Good investing,
Chris Igou
Further Reading
"Take what you do well, add in AI, and suddenly you're not just a vendor," Josh Baylin writes. One company is using AI to transform one of the most overlooked industries in America. And for investors looking to get in early on the next great AI play, this company offers a rare opportunity.
"AI isn't waiting decades," Rob Spivey says. The U.S. power grid isn't ready for AI's increasing energy demands. But one recent executive order could soon boost the natural gas industry... and, with it, usher in the next big AI boom.
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