In 2023’s market narrative, perhaps no factor impacted equities more than AI’s big moment. OpenAi’s ChatGPT burst onto the scene near the start of 2023. By proving the capability of large language models and machine learning, it boosted firms’ earnings in areas as diverse as agriculture and tech. With news of OpenAI’s turmoil between exiled former CEO Sam Altman and its employees versus its nonprofit board, however, active investing could be poised to handle AI burnout.
Perhaps no part of AI mania this year has symbolized artificial intelligence’s ascension as strongly as ChatGPT. All kinds of firms quickly saw the merits of a chat bot, from customer-facing marketing platforms to finance firms.
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Turmoil at OpenAI reminds markets of the risk of relying so thoroughly on one technology or sector. Debate will only grow regarding AI regulation. More substantively, many AI-related firms rely on OpenAI’s ChatGPT, and turmoil there could impact them as well.
Active Investing for the AI Landscape
Outside of drama at the firm are the macro factors looming over AI. The Fed’s plans for a higher-for-longer rate regime may start to impact tech firms that make up the AI ecosystem, as tech firms have to roll over into more expensive debt. Taken together, the above factors underscore the role that active investing can play in adapting to challenges to AI.
An active investing approach can identify the firms poised to ride out uncertainty tied not only to rising rates, but also drama at given firms. Active managers traditionally bring experience with a specific market area to their work, and given those factors, an active approach to AI entering 2024 could appeal.
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