ChatGPT has lit up interest in artificial intelligence on the internet and among investors.
Insider’s Carla Mozée asked OpenAI’s buzzy chatbot how to get in on the AI craze.
Some mega-cap tech names like Google and ETFs were on its list of ideas.
ChatGPT – a source for hot stock tips?
That’s a stretch, but OpenAI’s chatbot has ignited an internet and investing frenzy surrounding artificial intelligence. ChatGPT has accelerated interest in natural-language technology, as the fun-to-use tool displays a human-like ability to perform tasks such as addressing investment question and writing layoff emails.
‘Big Short’ investor Michael Burry warned stocks would crash and rallies wouldn’t last. Here are 6 of his key tweets in 2022, and what they meant.
“The Big Short” investor Michael Burry suggested the S&P 500 could plunge below 1,900 points.
The Scion Asset Management chief based his prediction on how past crashes have played out.
Burry said brief rallies were likely, and joked about his penchant for premature predictions.
Michael Burry, the hedge fund manager of “The Big Short” fame, rang the alarm on the “greatest speculative bubble of all time in all things” in the summer of 2021. He warned the retail investors buying up meme stocks and cryptocurrencies that they were headed towards the “mother of all crashes.”
The Scion Asset Management chief’s grim prediction may be coming true, as the S&P 500 and Nasdaq indexes tumbled by 19% and 33% respectively in 2022. In tweets posted in May 2022 then subsequently deleted, Burry took credit for calling the sell-off, explained why he expects further declines, and cautioned against buying into relief rallies.
Here’s a roundup of Burry’s best tweets about the stock-market slump:
The pandemic crash was just the start
The S&P 500 index has rebounded strongly from the pandemic crash in the spring of 2020, rising from a low of 2,192 points to around 3,800 points today. However, it could halve in value to below 1,900 points over the next few years, Burry tweeted on May 3, 2022.
When the S&P 500 has crashed in the past, it has traded lower several years later, Burry noted. He pointed to the index bottoming 13% lower in 2009 than it did in 2002, 17% lower in 2002 than it did during the Long-Term Capital Management fiasco in 1998, and 10% lower in 1975 than in 1970.
If the benchmark index follows that historical pattern, it could trade 15% lower than its level in the spring of 2020, Burry said.
There may be epic but short-lived rallies
A “dead cat bounce” refers to a temporary rebound in stock prices after a significant fall, often because speculators buy shares to cover their positions.
They often occur during major declines in the stock market, Burry said in a May 4 tweet. The implication is that investors shouldn’t get their hopes up about any rallies in the coming months, as they’re likely to be brief respites that won’t result in a market recovery.
Burry noted that 12 of the 20 largest one-day rallies in the Nasdaq index took place as the dot-com bubble burst, while nine of the S&P 500’s 20 biggest one-day rallies occurred in the aftermath of the Great Crash in 1929.
Don’t be fooled by stocks rebounding
Stocks could stage multiple rallies before the crash is over, Burry warned in a May 5 tweet.
He noted that after the dot-com bubble burst, the Nasdaq rallied 16 times by more than 10% — gaining on average 23% each time — on its way to a 78% decline at its nadir.
Burry also emphasized that after the Great Crash of 1929, the Dow Jones index rallied 10 times by more than 10%, rising by an average of 23% each time, before bottoming at a 89% decline.
Stocks are on a dangerous trajectory
The US stock market appears to be following the pattern of previous bubbles, leaving it poised for a monumental crash, Burry noted in a May 8 tweet.
The Scion chief pointed to the S&P 500’s trajectory over the past 10 years, noting it was strikingly similar to the index’s chart for the decade leading up to the dot-com crash, and the Dow’s chart for the 10 years before the Great Crash of 1929.
Burry suggested that human nature was behind the consistently decade-long buildups, and implied that history is repeating itself.
Burry predicts correctly, but early
Burry appeared to take a victory lap in a May 10 tweet, suggesting he believes the stock-market crash that he’s been warning about has finally arrived.
The Scion boss joked he was early with his prediction, just as he was during the mid-2000s US housing bubble.
Burry also nodded to Elon Musk calling him a “broken clock” last year, after the Scion chief bet against Tesla stock, predicted it would collapse in value, and questioned Musk’s motives for selling his company’s shares.
Stocks are set to tumble a lot further
7/7 SLIDES
I jumped into ChatGPT and asked two questions about getting exposure to AI through the financial markets. ChatGPT’s suggestions included well-known companies such as Microsoft, but it also offered assets that aren’t tech behemoths or household names.
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How can I invest in the AI craze?
“There are several ways to invest in AI,” ChatGPT answered. “1. Invest in technology companies that are developing AI products or services. 2. Invest in venture capital funds that specialize in AI startups. 3. Invest in AI-related stocks,” for starters.
The tool’s examples of tech companies working with AI were Microsoft, IBM, and Google’s parent Alphabet. For AI-focused companies, Nvidia, Intel and Applied Materials popped up.
“Purchase shares of private AI companies,” it also responded.”This can be done through equity crowdfunding or venture capital firms.”
ChatGPT’s charm stems from its natural-language ability, so I asked it:
What companies can I invest in for exposure to natural language processing?
Its response:
1. Amazon (AMZN): Amazon is a leader in natural language processing (NLP), leveraging its AWS platform to provide customers with a suite of NLP solutions, including Amazon Lex, Amazon Comprehend, and Amazon Transcribe.
2. Microsoft (MSFT): Microsoft has a number of different NLP products, including Microsoft Cognitive Services and the Azure Machine Learning platform. (ChatGPT didn’t tell me that Microsoft is a major partner of OpenAI.)
3. Google (GOOGL): Google has a variety of NLP products, including Google Cloud Natural Language and Google Cloud Speech-to-Text.
4. IBM (IBM): IBM has a variety of different NLP solutions, including Watson Natural Language Understanding and Watson Discovery.
5. Apple (AAPL): Apple has a variety of NLP solutions, including the Apple Machine Learning platform and the Natural Language Framework.
“The hype surrounding Artificial Intelligence has spilled over into retail investments,” Vanda Research, which tracks retail investing activity in more than 9,000 stocks and ETFs, said in a note this week.
ChatGPT didn’t mention C3.ai, but I’ll forgive it. C3.ai stock has more than doubled this year, with this week’s surge set off after the business AI software maker said it would integrate ChatGPT into its lineup of AI tools.
For now, you can’t invest directly in research lab OpenAI. But I asked ChatGPT anyway: Can I invest in ChatGPT?
“No, ChatGPT is not an investment platform. It is a platform that enables users to earn rewards by simply chatting with bots.”
