We're Still Mapping Out Our AI Future
Dear subscriber,
Artificial intelligence ("AI") has huge promise. But let's be honest...
Talking to a robot and trying to coax it into doing exactly what you want isn't the revolutionary intelligence that science-fiction writers dreamed up.
With today's AI products, you sometimes feel like a wizard trying to find the magic words to get a spell to work just right.
Still, it's very clear that AI chatbots won't be the end stage of this emerging technology.
Models will get better... but even more important is how AI gets integrated into products and makes day-to-day tasks easier.
In other words, we're still working out just how AI will shape the future.
And the truth is, no one really knows what AI business models will look like one year from now... let alone 10.
That's part of why chipmakers and other "picks and shovels" AI plays have done so well. People are confident that AI use will grow and that we'll need more chips.
But as for what AI businesses people will actually pay for... it's hard to know.
For now, we're still playing with chatbots. And there's not much innovation there. All the AI apps look almost identical. They all have a friendly greeting, a box where you can enter your prompt, a way to attach files, and a drop-down menu for model selection...
This is a step away from the typical Silicon Valley approach.
In prior tech breakthroughs, Silicon Valley has been obsessed with the user experience.
Tech workers would perform endless tweaks and tests to figure out exactly what customers want... and deliver it to them.
That's how social media platforms like Facebook, Instagram, and TikTok have gotten so addictive to so many. They are hypertuned to the user's desires.
AI chatbots have evolved in reverse. Silicon Valley has developed this really cool and impressive tool that can do all sorts of things. And it's putting it in front of people even though us users haven't figured out just what we want to get from it yet.
The most practical uses for AI have come in coding and software development. AI-assisted code generation can make programmers much more productive. That's clearly going to grow and create revenue.
But other promises of AI have hit some snags along the way...
For instance, last year, "buy now, pay later" company Klarna announced it would fire 700 humans and have AI run its entire customer-service operation.
But this week, the company is backpedaling. While it has certainly benefited from cost reductions, it admits that service quality has suffered. Klarna is now looking to bring in real people to handle customer service again.
For now, the tech giants are still experimenting with ways to integrate AI into their products.
On the investment side, we're all watching to see what sticks so we can better understand what the future of AI will look like.
This week, we got news on two big tech companies – two of the biggest stocks in the market – regarding their AI businesses...
First, Apple (AAPL) will reportedly open up its AI models to software developers outside of the company so they can create apps for the iPhone and other Apple devices.
Apple had an early AI win when it launched Siri back in 2011. But since then, it has lagged behind as other AI assistants have surpassed Siri in capabilities.
While Apple has worked on developing its own models, progress has been slow. The company is even facing a class-action lawsuit for promising AI-based iPhone features that it hasn't delivered yet.
Part of the trouble is a clash with Apple's culture. The company is known for creating carefully designed, highly polished products that delight consumers and feel magical.
But today, AI is still very messy. Models don't do exactly what you ask them to. Even AI leaders like OpenAI have issued public apologies acknowledging certain problems and weird responses from its models. And it has had to pull back some of its products for fine-tuning.
Getting this right is important to Apple. After all, if AI fulfills its promise, our devices will become little more than portals to access AI tools. And if Apple's tools can't deliver, that will erode its formerly impenetrable brand and competitive moat.
It may not matter whether the iPhone uses Apple's own AI model... or one outsourced from another software designer. The iPhone simply has to work and deliver on its AI promises.
This is part of the reason Apple shares have been in decline since January. (Of course, the threat of tariffs doesn't help either.)
By opening up its AI models to other developers, Apple can hopefully allow some innovation outside of its own four walls and find a way forward.
We also got news from another tech titan... Google parent Alphabet (GOOGL).
Like Apple, Alphabet had an early lead in AI. The transformer model that powers large language models ("LLMs") was built at Google.
And while its DeepMind division was working on AI for years, and it had chatbots like Gemini that were similar to OpenAI's ChatGPT, it released them too slowly... ceding the big, splashy release to OpenAI.
Now, its models top many of the AI leaderboards.
And this week, it held its annual developer conference and announced a whole slew of new and improved AI tech.
Platformer, a media website that reports on social networking, describes the list of Alphabet's new offerings as "staggering both in length and in the variety of product names it contains."
Here are a few new products and updates from the announcement...
- Google Beam – a platform that turns 2D video calls into realistic 3D video experiences
- Flow – a filmmaking app that lets users create AI-generated video and allows them to control characters and stitch clips together
- Enhanced reasoning and an upcoming DeepThink research mode
- Augmented-reality glasses
- Live language translation in Google Meet
But Wall Street cares mostly about one thing...
Google announced that it was adding an "AI mode" to its main search page. This tab is going to use AI to produce deeper, more useful search results for users.
Now, like Apple, AI competition can be a threat to Alphabet's core business.
If people go to other AI tools like ChatGPT and Perplexity to ask questions, that means less search volume for Google overall. And Google's advertising and search businesses go hand in hand – they are the foundation of the company.
With the announcement of AI mode, Google is taking this threat head-on...
The company promises AI mode will be able to pull together deeper results, interact with other pages to do things like book travel, and use your history and e-mail data to find the right results for you.
GOOGL shares rose about 5% on the news, so Wall Street seems to like Alphabet's AI focus. But the stock is still down big since January. And it has a long way to go to recover the rest of its losses...
Alphabet has the advantage of a massive user base and several dominating businesses. There's the Google search engine, Android mobile operating system, Google Maps navigation tool, Google Chrome web browser, Google Play app store, Gmail e-mail service, and YouTube streaming service.
But the users it can count for Gemini and its other AI tools are still behind that of OpenAI.
The AI race will create real disruption, including for the models that looked completely unbeatable just a few years ago.
Apple and Alphabet are learning this already. And they're trying to position their businesses ahead of it.
For now, Wall Street is watching every AI product announcement and update to try and understand just where AI users will spend their time and money... and how that will generate a return on the billions of dollars we're seeing in AI spending.
We'll keep you up to date on the opportunities we see ahead – and what they mean for our AI future.
What Our Experts Are Reading and Sharing...
While AI progress is astounding, you have to be careful. The Chicago Sun-Times published a summer reading list... full of AI-generated books that don't exist. As one (human) writer said, "I can't believe I missed it because it's so obvious. No excuses. I'm completely embarrassed."
I've warned you before about the "sell America" trade in these pages. As Congress grapples with a spending bill that will enlarge the deficit, global investors have off-loaded 30-year Treasury bonds, driving their yields up. The real trouble is that higher yields make the deficit hard to pay down.
JPMorgan Chase (JPM) CEO Jamie Dimon recently said that people are too complacent about tariffs and the risk of stagflation. Yes, tariffs have eased a bit... but Dimon says, "Even at these low levels, if they stay where they are today, [those are] pretty extreme tariffs."
New Research in The Stansberry Investor Suite...
This week and next, we're sharing a two-part series of essays that dive into the Stansberry Score...
First, we look at a hot stock that has recently been powered by a viral TikTok trend.
A popular fitness influencer used a certain product in one of his videos... and it sent the value of the company behind that product up by nearly $3 billion in just a couple weeks.
As investors, we see these sorts of hot trends all the time.
The question is, how do you know if it's a real investment opportunity... or just a flash in the pan?
The Stansberry Score can help you. We use our rankings to break down the company in question – and whether it actually makes for a solid, long-term investment.
Next week, we'll use the Stansberry Score again to look at an outstanding company in the same exact industry and see how it compares. (Spoiler: This company has been one of the best-performing stocks over the past decade – and it does something important to drive shareholder returns.)
Stansberry Investor Suite subscribers can read the entire report here.
If you don't already subscribe to The Stansberry Investor Suite – and want to learn more about our special package of research – click here.
Until next week,
Matt Weinschenk
Director of Research
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