The Markets - June 26, 2023
The Artificial Intelligence (AI) Express is traveling fast.
Investors are enthusiastic about AI. Late last year, an AI research lab introduced a chatbot that could answer questions – and people were enthralled. Within two months of its introduction, more than 100 million people had engaged with the technology, reported David Curry of Business of Apps.1 It wasn’t long before AI platforms that could generate images and audio, and help with coding were released.
It’s difficult to know whether investor enthusiasm influenced companies, but more firms mentioned artificial intelligence on recent quarterly earnings calls than ever before. AI mentions were up 77 percent during fourth quarter calls (after the chatbot was released) and reached an all-time high on the most recent round of calls, reported Jennifer Ryan of Bloomberg.2
Between March 15 and May 25, AI was mentioned on the earnings calls of 110 companies in the Standard & Poor’s (S&P) 500 index, reported John Butters of FactSet.3 The sectors where AI was mentioned the most were:3
- Information technology (IT), which includes industries like semiconductors, software, and IT services;
- Industrials, which includes industries like aerospace and defense, air freight and logistics, transportation, and construction and engineering; and
- Communication services, which includes industries like telecommunications services, entertainment, and interactive media and services.
Recent stock market gains have been attributable, primarily, to seven large stocks, five of which are in the IT and communication services sectors. Last week, as major U.S. stock indices gave back some gains, three of the companies finished the week higher and two outperformed the index, reported Al Root of Barron’s.4
U.S. stocks dropped last week largely because investors didn’t like what Federal Reserve Chair Jerome Powell had to say. He suggested there could be more rate hikes this year, and that revived recession concerns, reported Stephen Culp of Reuters.5 Yields on most U.S. Treasuries finished the week unchanged or higher.6
WHAT DO YOU KNOW ABOUT AI’s LIMITATIONS? As you read about AI, you are likely to encounter some confusing terminology. The U.S. General Accounting Office (GAO) explained that generative AI is “a technology that can create content, including text, images, audio, or video, when prompted by a user. Generative AI systems create responses using algorithms that are trained often on open-source information, such as text and images from the internet. However, generative AI systems are not cognitive and lack human judgment.”7
The last sentence in the GAO’s definition is quite important. See what you know about AI’s limitations by taking this brief quiz.
- Research scientist Janelle Shane, who writes AI Weirdness, trained a neural network with data from 30,000 cookbooks and asked it to suggest new recipes. Which of the following recipes did it NOT suggest?
- “Chocolate Baked and Serves” – a brownie recipe featuring a cup of horseradish
- “Ethan’s Eggs” – made with pancakes, sugar, and Skittles
- “Small sandwiches” – everything but the cheese spends an hour in a food processor
- “Good Wine Drained Chili” – a chicken dish made with milk, garlic and chocolate chips
- An attorney asked a generative AI chatbot to help him draft a legal brief. What did the chatbot do?
- Referenced fictional past court cases that were fabricated by the chatbot
- Created a deepfake video showing the client being injured
- Created a deepfake audio file of flight attendants discussing the client’s alleged injury
- Wrote the brief in the style of Shakespeare
- The bellhop robots at a Japanese hotel were “let go” after they:
- Consistently left skis and snowboards in the elevators
- Delivered luggage to the wrong rooms
- Ran into walls and tripped over curbs
- Kept delivering toothbrushes when guests requested phone chargers
- A Scottish soccer team opted for AI-operated cameras that would track the ball and provide better television footage than human camera operators. The choice infuriated fans because:
- The fans didn’t want people to lose their jobs
- The AI mistook a ref’s bald head for the soccer ball and kept zooming in on him
- The AI confused the stand entrances with the goals, causing fans to miss the action
- The AI kept zooming in on the goal whenever it anticipated a player would score
Weekly Focus – Think About It
“It is change, continuing change, inevitable change, that is the dominant factor in society today. No sensible decision can be made any longer without taking into account not only the world as it is, but the world as it will be.”8
—Isaac Asimov, biochemistry professor and author