Companies heavily investing in AI have low quant valuation grades
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Companies will be wasting a lot of money investing in artificial intelligence, said MIT economist Daron Acemoglu in a Bloomberg interview.
Artificial intelligence will only be able to do or heavily assist 5% of all the jobs over the next decade, he said, and “you’re not going to get an economic revolution out of that 5%.”
Nvidia (NVDA) CEO Jensen Huang projected that companies and governments will need to spend as much as $1T to upgrade their data center equipment with AI in the upcoming years.
Microsoft (MSFT), Alphabet (GOOGL), (GOOG), Amazon (AMZN), and Meta Platforms (META) alone have invested more than $50B into their capital spending in the second quarter of 2024.
Acemoglu also said that the AI hype could either slowly cool down for a “modest” use of the technology; or the hype could continue for a year or so, leading to a tech stock crash; or the hype could go on for several years, with companies cutting jobs and spending hundreds of billions of dollars into AI “without understanding what they’re going to do with it,” he said.
That last scenario could cause “widespread negative outcomes for the whole economy.”
Acemoglu concluded that “you need highly reliable information or the ability of these models to faithfully implement certain steps that previously workers were doing. They can do that in a few places with some human supervisory oversight…but in most places they cannot. That’s a reality check for where we are right now.”
These are 10 companies investing heavily in AI, and their Seeking Alpha quant valuations:
- Amazon (AMZN) – Valuation grade: D-
- Meta Platforms (META) – Valuation grade: D-
- Tesla (TSLA) – Valuation grade: F
- Upstart Holdings (UPST) – Valuation grade: D+
- Netflix (NFLX) – Valuation grade: F
- Alphabet (GOOGL) – Valuation grade: D-
- JPMorgan Chase (JPM) – Valuation grade: C
- Boeing Co. (BA) – Valuation grade: C
- Johnson & Johnson (JNJ) – Valuation grade: D
- Exxon Mobil (XOM) – Valuation grade: D+
However, the following two AI ETFs are buy-rated.
AI ETFs: