The Long Road to Intelligence

Do you remember the days when we suddenly became “virus experts”, “renewable-energy specialists”, or even “military strategists”? Now we are climbing the next steep learning curve. This time it is about artificial intelligence. Or simply AI.

As an investor, this shift comes with particular challenges. It is not enough to keep up with the conversation among friends. Investment decisions are tied to this transformation. And the portfolios we manage for our clients need ongoing review and adjustment.

An unlisted giant

The real twist is that the most important player is not even publicly traded. OpenAI, known for its AI chatbot ChatGPT, secured USD 6.6 billion in funding in October. The deal was based on a company valuation of USD 500 billion. That puts OpenAI among the 20 largest companies in the United States. Somewhere between Netflix and Exxon Mobil.

One would suspect extraordinary profitability. Yet that is not the case. There is uncertainty even around revenues and costs. Apparently, AI models do not automatically benefit from scale. The 700–800 million ChatGPT users are currently generating higher costs than subscription revenues can cover, and there is no end in sight. The debates range from how quickly models might reach human-level intelligence to the question of whether a sustainable business model exists at all.

Alphabet and the power of expectations

A major competitor is Google’s parent company Alphabet with its Gemini model. The stock is trading at an all-time high. The share price has doubled since its April low, showing how desperately market participants are trying to process the flood of information. A price swing of 100% in a company valued at USD 3.5 trillion illustrates the intensity of shifting opinions. Alphabet is now the fourth-largest company in the world, positioned between Microsoft and Amazon.com.

Someone once said. “If you’re not confused, you don’t really understand the situation.” In moments like this, I am grateful that our Gutmann equity strategy comes with built-in guardrails. Diversification and discipline give it a clear structure. We invest in many important publicly listed companies with exposure to AI. It keeps us close to the developments, without taking on extreme risks. A 100% rally within a year can reverse just as quickly. The same journey downward would mean “only” minus 50%.

Such setbacks in individual stocks can never be fully avoided. But we can prevent them from becoming fatal for the portfolio. In phases of market euphoria, we therefore avoid betting everything on one horse. We remain committed to our investment approach. Balanced and disciplined.

PS: Recently, I was on the 'Talking Billions' podcast, where I talked to Bogumil Baranowski about the early Warren Buffett Partnership years. You can listen to it on your favorite platform.

Youtube

Spotify

Apple