In yesterday’s Daily Cut, we focused on Apple (AAPL).
Specifically, we discussed how it’s abandoning its plans to launch an electric car.
After 10 years and billions of dollars in investment, the Apple Car is no more.
It’s likely a wise decision. Apple should stick to its knitting.
But what we didn’t explain yesterday is where Apple plans to divert the resources previously allocated to the car project…
You guessed it… artificial intelligence (AI).
Based on the recent press surrounding AI snafus by big tech, we wonder if Apple has been paying attention. Or maybe they figure they’ll learn from others’ mistakes and dominate… just as they did with smartphones.
If only it were that simple…
Market Data
The S&P 500 closed down 0.2% to end the day at 5,069.79… the NASDAQ fell 0.6% to close at 15,947.74.
In commodities, West Texas Intermediate crude oil trades at $78.36, down 26 cents…
Gold is $2,042 per troy ounce, up $3 from yesterday…
And bitcoin is $60,375, up $3,590 since yesterday.
And now, back to our story…
Surely Apple Won’t Make the Same Mistake
It’s very tempting to pile on to Google (GOOG).
After all, for the past 18 months or more, launching anything even vaguely related to AI has been a license to print stock price gains.
Look at Nvidia (NVDA). Pretty much the entire reason for its 600% stock performance since October 2022 is due to the current and future demand for chips to help with AI growth.
Source: Bloomberg
The company’s market capitalization has increased from around $300 billion to a touch under $2 trillion. Despite that, it’s a brave investor who dares to short-sell it.
As for Google, we won’t pile on too much – just a little.
You’ve likely seen the images produced by Google’s Gemini AI system.
Perhaps the most bizarre example was its response to the prompt: “Show me a German soldier in 1943.” It then generated an AI image of a Black gentleman in a Wehrmacht uniform.
We can’t know for sure if there’s zero historical accuracy to it. But as an overall representation of the demographic at the time… it’s an odd response.
Besides, if Google wanted to be diverse, British historian, Dr. Mark Felton, uncovered evidence of a “Japanese Legion” that served in the Wehrmacht during World War II.
And that’s not the only example. Indian independence leader Subhas Chandra Bose helped Germany create an “Indian Legion” – Indian soldiers who had fought on the British side but were captured by the Germans. They were formed into the Indian Volunteer Legion of the Waffen-SS.
Whether they were volunteers or “volunteers” is another question.
But to us, we have to wonder what the value of an AI image generator is if it doesn’t give you what you want. Or it provides content of dubious accuracy as a default rather than as a direct request.
We’ll leave others to answer that.
So how will Apple tackle AI? And what can it do to make sure it doesn’t make the same missteps as Google? Missteps that have wiped more than 12% off Google’s value since the AI launch.
That’s around $235 billion.
Well, it’s hard to feel too positive about it. Rightly or wrongly, following the Google Gemini debacle, folks will apply the same “tests” to all AI content and image generators.
With the result that these companies will implement so many guardrails and restrictions, the whole thing will become meaningless.
It seems that Nvidia had and still has the best idea when it comes to benefiting from the AI growth story — make the chips, and let others navigate the “content minefield.”
But Apple isn’t a chipmaker. Apple is a content provider and content curator. Everything in the Apple store is there only because Apple allows it to be there.
So, what will Apple do with its AI division? Will it step into that proverbial minefield… making itself an easy target? Or will it learn from the missteps of others and integrate AI further behind the scenes?
If the top brass have any sense and care about the stock price, they’ll opt for the latter.
AI may be making fortunes for many, but it’s making fools out of plenty of folks too.
Rogue Bots!
The AI calamity seems to have no end. Take this news report from Bloomberg today:
Microsoft Corp. said it’s investigating reports that its Copilot chatbot is generating harmful responses that users have called bizarre, disturbing, and, in some cases, harmful.
Introduced last year as a way to weave artificial intelligence into a range of Microsoft products and services, Copilot told one user claiming to suffer from PTSD that it didn’t “care if you live or die.” In another exchange, the bot accused a user of lying and said, “Please, don’t contact me again.” Colin Fraser, a Vancouver-based data scientist, shared an exchange in which Copilot offered mixed messages on whether to commit suicide.
Microsoft (MSFT) claims some of the weird bot responses were down to users “tricking” the system.
Whether that’s true or not, it’s another blunder for AI and how it interacts with the public.
Final Word
The conclusion, of course, is that this is all just human nature.
You can’t trust (or expect) people not to be mischievous and mess around with things.
Perhaps one day we’ll all get bored with thinking up of deliberately provocative questions to ask AI software.
Maybe all this stuff is just the modern equivalent of making prank calls… or knocking on your neighbor’s door as a kid and running away.
We all grew out of that (mostly). This will probably be the same.
More Markets
Today’s top gaining ETFs…
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The Real Estate Select Sector SPDR Fund (XLRE) +1.3%
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iShares MSCI Chile ETF (ECH) +1.2%
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First Trust RBA American Industrial RenaissanceTM ETF (AIRR) +1.1%
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Invesco Active U.S. Real Estate Fund (PSR) +1.1%
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Nuveen Short-Term REIT ETF (NURE) +1%
Today’s biggest losing ETFs…
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Invesco China Technology ETF (CQQQ) -4.8%
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Global X MSCI China Consumer Discretionary ETF (CHIQ) -3.1%
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VanEck ChiNext ETF (CNXT) -2.8%
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KraneShares MSCI China Clean Technology ETF (KGRN) -2.6%
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iShares MSCI South Africa ETF (EZA) -2.1%
Cheers,
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Kris Sayce
Editor, The Daily Cut