Many of you have may have heard about ChatGPT, an artificial intelligence(A.I.) chat bot that was developed by OpenAI. Since its release in November 2022 it's unleashed a rush of investing that has not been seen since the technology boom in the late 1990s. Companies are moving at light speed to develop, implement and use A.I. to lower costs and increase efficiencies. So far the semiconductors companies [who are the backbone of A.I.] have been the biggest benefactors. However, more and more companies are starting to develop their own generative A.I. applications and Large Language Models(LLM’s) to compete. The big question is how long will this enthusiasm last.

 

If we use the 1990 Internet boom as our guide it is likely we are in the early innings of the artificial intelligence rush. In 1995 Netscape Communications went public and the company doubled on its first day of trading. This could be viewed as the beginning of the dot-com era and as you can see from the chart below the enthusiasm that surrounded the dot-com era lasted for more than five years.

 

 

During the Internet boom many companies traded at valuations that had not been seen before. If artificial intelligence is as impactful as the Internet was then it's probably fair to assume that we are in the early stages of the artificial intelligence boom and valuations will once again trade at multiples that make many investors uncomfortable. This will create both exceptional returns and spectacular failures!

 

As you can see from the chart above Netscape went public in 1995 and was bought out by America Online in 1999, it is likely that many of you have not heard of either of those companies because they do not exist today. Both of these companies had exceptional returns at one point but ended in spectacular failure. However, it's also important to point out that with the Internet boom and bust came incredible companies and investments like Amazon, Netflix, Facebook and many more. Regardless of what your thoughts are about A.I. and whether these companies deserve the valuations that they trade at, it is going to create a very interesting investment atmosphere over the next few years.

 

I've also included a piece from our CIBC Economics Team entitled "Time to waive or defer HST on purpose built rentals".

 

As always, if you have any questions please feel free to give us a call at any time.

 

Have a great weekend.

 

Milan