Bob Dylan wrote this song in the fall of 1963 and recorded it in 1965 as a 45RPM single in Britain where it reached #9 on the UK singles chart that year. The song was later recorded on Columbia records in New York as the title song of his third album. The song's lyrics transcends time because change is always a constant in our lives. Many artists have recorded the song with great success and it was ranked #59 on the top 500 "All Time Greatest Hits" by Rolling Stone magazine.
I believe the changes seen in 1963 will pale in comparision to what is about to happen in 2024 and beyond. The changes that artificial intelligence will bring will be life changing for nearly everyone. First, business will become far more effecient with fewer people. Unfortunately many will lose their jobs to AI automation. Machine learning has the ability to replace call center agents, clerical workers, accountants, paralegals and many other jobs currently performed by humans. One only has to look at the hundreds of billions of dollars being spent on AI to realize that the payoff for companies is to operate leaner.
The fuel that AI runs on is data. I have read that the Internet has nearly been exhausted of its data to feed the large language models being trained to run on Nvidia's GPU processors. So is this AI story about to run out of steam? I don't think so. Just imagine the massive amounts of data stored by research labs of drug companies, universities, goverments, technology companies, banks, and many other organizations. Suddenly, all this otherwise useless data now has value. It can be sold, traded, and added to the balance sheet of companies, making them much more valuable. Instead of wasting time and money on duplicate research, a drug company can buy the data already produced and bring products to market faster. AI has the ability to unlock bottlenecks in almost every industry. Maybe this is part of the reason that the S&P index as expressed by the index fund SPY is trading at a very rich PE of 27.8X.
Once the training phase of teaching the "Large Language Models" is completed, the next phase will be the inference stage. This where the models actually generate answers to the questions being asked. I have read that this stage may be better handled by some of Nvedia's competitors such as AMD, Intel, or even custom chips by Amazon. Every one of the magnificent seven companies are trying to unseat Nvidia as the supplier of GPU chips to equip their data centers. At this time Intel is the laggard in the development of GPU's. They just fired their CEO in the hope that new leadership will right the ship but most analyists are skeptical that they can catch up. It seems like all companies are being valued through the lens of their position in the AI race for dominance. At the current time, Nvidia has nothing to worry about because they have a lock on the GPU market for both the training and inference phases.
The flurry to build new data centers equiped with Nvidia's GPU's is rapidly draining cash from the seven major tech companies. Nvidia is the benificary of most of the spend but not all. Data centers will require lots of electricity, more than is currently available on the grid. This has caused many utility companies' valuation to skyrocket. Backup power is also critical for these new data centers. Diesel generators made by Cummins will give that stock a boost because not only will they supply the hardware but service of the equipment will be a long term revenue stream. Memory storage for data will also be required and Micron and Samsung should benefit from that. GPU's run hot so cooling is necessary for each server. A company called Vertiv sells liquid cooling systems but the stock has run up to nosebleed levels. Another beneficiary of the buildout of data centers is the large engineering companies who are tasked with the design and construction of huge new buildings.
AI isn't the only transformative investing theme going forward. The development of GLP-1 agonists drugs have the potential to change the landscape of medicine forever. It is estimated that over one billion people worldwide could benefit from them. Currently they are only available in injectible form but a massive effort is under way to market an oral version. The pharma sector is currently out of favor due to the new administration taking office next year, making this an excellent time to pick-up some exposure to the best-in-class. The promise of deregulation over the next four years should benefit financials like banks, insurance companies, credit card issuers and consumer credit companies.
People my age don't really like change but it's coming anyway. The only difference between the change Bob wrote about in 1963 and now is the speed that it occurs. If you can't stop it you might as well profit from it. A little time spent researching these themes and acting on them might help you adapt to the changes a-comin'.
