Was I WRONG about Microsoft (MSFT)?
Welcome to AI Collision š„,
In todayās collision between AI and our world:
Snog, marry or avoid MSFT?
Brains with chips
Jacked Garfield
If thatās enough to get the stock chart screaming, read onā¦
AI Collision š„ did we get MSFT wrong?
When I first launched AI Collision š„ on 3 October 2023, it started from nothing.
That first post was sent to ten people, of which six opened and, in total, the post has just 175 views to date.
Today, the number of subscribers AI Collison has here on Substack is 1,640. About 55% of people open the email that is sent to their inbox. And our posts get around 2,000 views each.
So I know a lot of people view AI Collision but donāt necessarily subscribe to it. Thatās cool. Hopefully one day they will. And if you read AI Collision but havenāt actually subscribed, please do. Thereās some stuff coming for its verified subscribers.
Substack also has this cool āstarā rating thing where the more someone opens our emails and shares our stuff, the more stars they get. The maximum is five stars.
Anyway, in the near future, AI Collision is looking at rewarding its most loyal readers, so keep an eye out for those things down the track ā special perks for our five-star readers and those who share and refer others to our Substack.
Thatās just a little intro to first say thanks for reading AI Collision. AI Collision is growing, but I always want to reach more people, so please share us with others or your social channels if you like how itās done here at AI Collision š„.
The other thing that I did when I launched AI Collision š„ was to have a couple of special reports that linked to the AI Collison welcome email when someone signs up.
Those reports are:
Itās that second report that I want to focus on here.
I suggest you read it. Just click the link above to check it out.
But if you havenāt, or if you already have, hereās the thingā¦
In it, the stock Iām talking about avoiding is Microsoft (NASDAQ:MSFT).
The thing is, Microsoft is doing great. Thanks to AI.
In fact, it just crossed the $3 trillion mark in terms of market capitalisation.
Incredible!
So why on earth would I say to avoid the company?
Here are a couple of the points from the special report:
This is a company worth US$2.4 trillion. In the last five years (during a period of rampant money-printing, incredibly low rates and a raging bull market) it has more than tripled in value. However, among some of the most energetic tailwinds in historyā¦ itās only tripled in value. Thatās not bad, but really, itās also not extracting maximum potential from the significance of what the AI boom can deliver.
Therefore, thereās a strong argument that Microsoft has diminished growth potential. Microsoftās size and market saturation limit its potential for exponential growth. The law of diminishing returns suggests that achieving significant returns on investment in a mega-cap company like Microsoft is probably unlikely.
Now, was I far off the mark?
Letās look at the data.
Microsoft traded at $318 on 3 October. Today, itās at $406. A tidy 27.6% gain.
But my point was the asymmetric-risk plays in AI that were in the market looked a bit more attractive than Microsoft in my view.
Take, for instance, a company like Super Micro.
Now, why would I say that? Itās deep in the AI game. The main reason isnāt that Microsoft is a bad AI company, but that opportunities to make better returns in other AI-related companies make more sense. And Super Micro Computer Inc. (NASDAQ: SMCI) is the perfect example of that.
Super Micro was trading at $280 on 3 October. And thatās after it was around $83 at the start of 2023.
Today, Super Micro is up around $512 at the time of writing. Thatās an even tidier 82.8% gain. The key driver of that? Well, itās AI, of course.
ASML Holdings NV (NASDAQ:ASML) is another. Trading around $570 on 3 October. Today, up around $868. Thatās a 52.2% gain.
Hereās another just to reinforce the point.
Broadcom Inc (NASDAQ:AVGO). On 3 October, Broadcom was trading at $814. Today, itās up at $1,208. Thatās a 48.4% gain.
These are all big companies in their own right too. Super Microās market cap is $28 billion, and then ASML at $344 billion and Broadcom at $565 billion fall right into mega-cap territory.
So itās not like weāre talking about penny-pincher stocks here. And thatās the thing about AI and AI stocks. Itās higher up the scale of size where weāre seeing the outperformance occur in stocks that are driven by AI tech.
While there are outsized gains (and much higher risk) in smaller companies, with AI, you can open the scale into companies that are already worth tens of billions to find outsized opportunity.
So yeah, Microsoft is still a great AI company. A 27% gain from a multi-trillion-dollar company is nothing to shy away from.
But for me, itās still one to avoid, because if youāre looking at ways to make your AI dollar stretch further in your portfolio, then I think there are better ways to play it in the market
AI gone wild š¤Ŗ
Funny meme timeā¦
This is funny because thereās an element of truth to it.
But Iām not here to dive into conspiracy theories or to question the motives of people like Bill Gates or even Elon Musk.
However, we have to take a moment to look at the fact that Musk has announced this week that his Neuralink project has reached some impressive new milestones.
According to Musk, the first human has now received the Neuralink implant and is ārecovering wellā.
Thatās good. But also, WOW.
He went on to explain in another tweet that Neuralinkās first product will be called āTelepathyā.
He said in a tweet that it:
Enables control of your phone or computer, and through them almost any device, just by thinking. Initial users will be those who have lost the use of their limbs. Imagine if Stephen Hawking could communicate faster than a speed typist or auctioneer. That is the goal.
If youāre wondering what in the heck is Neuralink, well, itās another one of Muskās grand idea companies.
You can find its site here.
Its stated mission, though, is to ācreate a generalized brain interface to restore autonomy to those with unmet medical needs today and unlock human potential tomorrowā.
Itās ambitious. Itās wild.
And I wonder where it sits on the AI spectrum.
Is it AI at all?
I mean, itās an artificial device directly implanted into a human brain ā a living human, I might add.
So weāve got the artificial part right and, I guess, the intelligence part. Or, at worst, itās helping to restore a level of intelligence to a brain that may have diminished intelligence.
Note: intelligence in this respect includes the ability to control things like basic motor function.
So, from my view, yeah, itās artificial intelligence. Which is also a reminder that AI, as it is often talked about, isnāt just restricted to text-to-image or video or deepfakes of Taylor Swift.
No, itās a whole host of medical and health applications, its autonomous systems, its decision-making and data analysis on a level that humans canāt meet.
Iām fascinated by the application of AI in this way, and hopefully itās as wild a game changer that weāve seen in AI yet. Hopefully it opens up some investment doors too in this very specific arena.
Weāll wait and see.
I am also curious what you think here too.
Boomers & Busters š°
AI and AI-related stocks moving and shaking up the markets this week. (All performance data below over the rolling week).
Boom š
Cyngn (NASDAQ:CYN) up 43%
Amesite (NASDAQ:AMST) up 18%
Microsoft (NASDAQ:MSFT) up 2%
Bust š
Tesla (NASDAQ:TSLA) down 9%
BigBear.ai (NASDAQ:BBAI) down 13%
iRobot (NASDAQ:IRBT) down 23%
From the hive mind š§
Not one, not two, but three trillion dollars. Thatās the market cap of Microsoft now. The company does a lot of different stuff, from devices to software, cloud, etc. Itās said that AI is driving its performance now. The only question is: where does it end? Does it end?
Sports Illustrated got into a lot of trouble (and eventual failure) thanks to its sneaky use of AI. Now the New York Times is very publicly looking to use AI in its operations. Are they trying to take themselves out? Or perhaps just keeping their enemies closer?
While on the subject of Microsoft, it just released earnings too. Check out whatās driving the masses of money itās making this quarter.
Artificial Polltelligence š³ļø
Thereās been some discussion in the Southbank Investment Research offices this week about the things that worry investors.
For instance, some people are worried that tech like AI will mean their jobs are at risk and that AI might mean itās harder to make money from the market in the future.
We all have worries and concerns about life and about investing. But thinking about the investing side of things, I wanted to ask you what your thoughts are.
AI Collision š„ is changing its format a little here and posting an open question. Your answers will be private, but it will help me to figure out what I can cover, write about and publish to help with those worries and fears.
Click the image and itāll take you to a SurveyMonkey page (Substack doesnāt do open questions it seems) and Iāll collect the responses.
If you want us to publish your answer or any questions you might have from it as well, make sure to let me know in your response. Otherwise, all answers will remain private.
Weirdest AI image of the day
Garfield discovers caffeine supplements ā r/Weirddallee
ChatGPTās random quote of the day
The human spirit must prevail over technology.” – Albert Einstein
Thanks for reading, see you on Tuesday. And if youāre enjoying our work, please like, share and leave comments below,
[…] like I suggested that Microsoft wasnāt perhaps the best idea if youāre looking for returns in the AI market, I suggest you throw Nvidia into that basket too […]