AI Story Gooses Stocks into the Ozone

Nvidia became the world’s first $4 trillion company last week, leapfrogging Microsoft, Tesla, Google and every other company struggling to stay in the AI game.  Our money is on Musk to compete the hardest. He is Nvidia’s biggest customer for their most powerful chips, which sell for as much as $200,000. Musk has been buying them by the tens of thousands.

He recently converted a vacuum cleaner factory in Tennessee into a site for the world’s largest supercomputer. It draws so much power that the cooling plant alone cost will cost $80 million. The machine will be used to train Grok, Musk’s horse in an AI field crowded with corporate strivers. Grok reportedly overtook competitors recently with a demonstration that showed the app capable of thinking almost like a human. Even skeptics were impressed with the way Grok figured out a novel way for hospitals to save power.  What startled them, however, was that Grok hadn’t even been asked about this; the AI assistant simply inferred and suggested it based on another, seemingly unrelated, energy solution it had worked on that even MIT-trained engineers hadn’t thought of.

But even if Nvidia has yet a few more prospective customers in Musk’s league, is the company worth $4 trillion?  A physicist friend of mine who uses AI intensively in his business said the stock is only warming up and that NVDA’s current price is a certain bet to double yet again. But exactly what will their chip customers sell to the world that could possibly justify such astronomical valuations? It would have to be much more than mere gains in productivity — or even that old investible standby, a cure for cancer.

Monsters from the Id

In an earlier commentary, I suggested facetiously that Nvidia and companies immediately downstream of it were being priced as though AI had the potential to become all things to all people. How this could actually happen was vividly imagined in the 1950s sci-fi movie Forbidden Planet. The story, loosely based on Shakespeare’s The Tempest, concerned an advanced civilization called the Krell that had been destroyed by an unknown force.  That force turned out to have been their own primitive subconscious — Monsters from the Id — conjured forth by a reactor they’d built to materialize all of their needs.

AI can practically do that now using a 3D printer and a storehouse of raw materials. “How about Fettucine Alfredo for dinner tonight, Grok?  And while you’re at it, make me a three-carat engagement ring with some graphite I bought for the occasion.” This arrangement would not only cut out the middle man for all of our daily needs, it would also eliminate most jobs.  Whether theoretically possible or not, no one believes that having our needs met in this way would make us happier. Concerning the insane bidding war for every investible tied to AI, we had better be careful what we wish for.