By Alex Callinicos
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Could AI fad signal another major crash?

The rise of investment in Artificial Intelligence and ChatGPT could signal trouble ahead
Issue 2894
AI ChatGPT economic markers economy

What does the scrabble for Al and ChatGPT mean for the global economy? (Picture: Mike MacKenzie

The political news continues to be bad. But you wouldn’t know it to judge by the state of the stock markets.  The major markets in the United States, Europe and Japan all reached record highs on Thursday last week.

There’s a broad mood of optimism because inflation is falling.  Central banks are, therefore, expected to start reversing the huge hike in interest rates they drove through in 2022-3.

But there are uncertainties about how quickly this will happen. The leap in share prices last week was centred on the technology sector that has proved so profitable in recent years.

But the star of the show wasn’t one of the big tech giants, but the previously obscure Silicon Valley company Nvidia. 

As the Financial Times put it, “Two years ago, Nvidia made most of its money selling graphics cards. It was a household name only to the most dedicated PC gamers.”

Yet last week Nvidia announced its after-tax profits had risen from £1.1 billion to more than £9.45 billion in the past year. 

In response its stock market valuation rose to £1.57 trillion, overtaking Amazon and Google to become the third most highly priced company in the world, after Microsoft and Apple. Why this transformation? Two letters— AI, artificial intelligence. 

The biggest recent tech sensation has come from the launch of forms of AI, such as ChatGPT, that use large language models.

Nvidia produces the bulk of the chips that are used to train and run these models. Here we find ourselves dealing with two levels of hype. The first is that ChatGPT and its like represent the moment at which machines begin to match and even to surpass human intelligence.

This is nonsense. What large language models do is to take and process vast amounts of information.  This then allows them to predict the best answers to questions put to them. 

Noam Chomsky—not just a great anti-imperialist but a theorist of language and mind—calls ChatGPT “sophisticated hi-tech plagiarism”.

He writes, “The human mind is not, like ChatGPT and its ilk, a lumbering statistical engine for pattern matching, gorging on hundreds of terabytes of data and extrapolating the most likely conversational response or most probable answer to a scientific question.”  

This then takes us to the second level of hype about the economic implications of AI. Many commentators argue that the likes of ChatGPT will hugely boost productivity and profits by making redundant many white-collar workers who process information—for example, in law, healthcare, and finance. 

Indeed, as Matteo Pasquinelli shows in his fascinating new book The Eye of the Master, AI historically has always functioned as a means of appropriating workers’ knowledge and reinforcing the hierarchies of power in production that bosses dominate.

Investment in AI chips has increased massively. Nvidia CEO Jensen Huang says that the total value of all the equipment in data centres will rise to £1.57 trillion in the next four or five years. 

Other self-interested voices, for example, Sam Altman, the controversial boss of OpenAI, which developed ChatGPT, are also talking up the scale of AI investment. Even if there proves to be some merit in these predictions, Nvidia may not continue to dominate the market.  

The tech giants Microsoft, Amazon and Google have started to produce their own chips and chipmaker AMD is already catching up with Nvidia. The whole scene is beginning to resemble the dotcom bubble at the end of the 1990s, which was driven by hype about the internet, then its early days. Enough fibre-optic cable was laid to span the earth several times. 

Then the crash came in 2000— an early warning of the much greater global financial crisis of 2007-9.

One tech strategist told the Financial Times, “There is a dislocation between valuations versus fundamentals in some areas. That happened in 2000. It’s a trading casino.”

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