Artificial Intelligence

Is it the best of times or the worst of times in the economy? It seems to depend on what data you review. On the negative side of the scale, the Conference Board’s Leading Economic Index is deeply negative, and the US Treasury yield curve is deeply inverted. We have not seen such stark indicators without a resulting recession in the last 50 years. On the other side of the scale, the S&P 500 and Nasdaq indices are up double digits year-to-date while the unemployment rate is still historically low and inflation, as measured by the year-over-year Consumer Price Index (CPI), is falling and has been for a year since peaking in June 2022. In fact, due to falling inflation, the year-over-year measure of US real (inflation-adjusted) average hourly earnings is positive after two years in the negative. Is it possible that the negative indicators are wrong this time?

So just what is going on with new developments in AI and how should we be thinking about it?  This is a sprawling subject, and I am not an expert in artificial intelligence.  My apologies in advance to any AI engineers who disagree with my understanding of the subject.  By no means do I expect to cover everything in this newsletter, but today I would like to discuss what AI is, what the new developments are, and give some perspective on how investors might think about AI.  Let’s dig in.