Invest Like the Best with Patrick O'Shaughnessy Modest Proposal - AI Commoditization and Capital Dynamics - [Invest Like the Best, EP.380]
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Jul 2, 2024 In this insightful conversation, Modest Proposal, an anonymous investor with a keen eye on public and private markets, delves into the complexities of today's economic landscape. He discusses the difference between frontier and open-source AI models, emphasizing the AI commoditization shift. The talk also covers overcapacity issues in transportation post-COVID and the economic implications of GLP-1 drugs for managing health conditions. Modest articulates the nuances of capital market dynamics, illustrating the challenges and opportunities investors face today.
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Surging Demand and Inelastic Supply
- Surging demand meeting inelastic supply leads to temporary surpluses, like the mid-2000s commodity boom driven by China.
- Markets often overvalue these surpluses, creating investment opportunities when supply eventually catches up.
Investing in NVIDIA
- Increased spending by frontier AI labs, driven by their belief in AGI, could boost NVIDIA's short-term stock price.
- However, long-term value depends on whether NVIDIA can maintain its dominance as a choke point for large tech companies.
AI Commercialization
- AI's economic impact is still small relative to the investment, similar to early internet infrastructure.
- Key questions include identifying productivity gains, potential revenue growth, and whether AI will disrupt existing software architectures.