Latest / The Curve / Investing in AI: Are We Too Late to the Party?

Transcript

Investing in AI: Are We Too Late to the Party? · The Curve

0:00
I am absolutely loving having these conversations with heaps of different experts.
0:08
I mean, I know that we're very lucky having Vic as our main go-to investing guru.
0:14
Can we call her a guru?
0:16
But having Zoe Wallace from Tempo in as a secondary, you know, investing expert has just been so interesting.
0:24
And in this particular conversation, we focus on AI and what is happening in this space?
0:30
And how can we invest in a way where we can take advantage of this particular trend?
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And I must say for someone who is quite late on the investing in AI bandwagon,
0:40
this gave me a lot more confidence and excitement in how if I want to stay investing in this space,
0:46
I can do that successfully.
0:48
So we hope that you enjoy it. And if you've got any questions for Zoe or Vic, you know, or me?
0:56
No, I'm guessing no one has questions for me, but comment them on this podcast.
1:02
And we will make sure we answer them next week in our final conversation with Zoe.
1:11
We're back for our Tempo temperature check, which I must say when we were brainstorming ideas,
1:16
I didn't think about how hard that alliteration was going to be to say.
1:20
Tempo temperature check.
1:22
Well, the reason we called it this is because we have Zoe Wallace with us in the podcast.
1:28
If you missed the last time we were speaking to her, the whole point of these conversations is to show you really
1:34
one of the faces behind the investment decisions at Tempo, which is an amazing investing app that is guided investing.
1:41
So you're able to input your own personal data.
1:45
And then I recommended some of their funds that would suit whatever your goals are.
1:49
And they're going to be talking about this, like when we were first talking about the partnership
1:55
and we were really excited about talking about Tempo to our audience, because it's such a brilliant platform.
1:59
And fun has been needed for so long.
2:01
Gosh, yeah.
2:03
A number of people that need help with investing.
2:05
Because the thing is it's all good to know you need to invest all good, like how Kiwi was there.
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That's all good guys.
2:11
But I think also just being able to highlight some of the amazing investing brains behind those investment decisions.
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And Zoe is one of those.
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So she's been in the investing space for a really long time.
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And we're very privileged to have her on to talk about another trend.
2:26
And that is sorry, I'm really having a total mouthful here.
2:29
But the reason we called it the temperature check is because it is kind of like checking in with what are the trends,
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what is going on in the world and like how is that impacting our investments?
2:41
Do you know what I mean?
2:42
I feel like I'm trying to...
2:43
Yeah, sure.
2:44
You know how far is the market?
2:46
Yeah, cold is the market.
2:48
How warm.
2:49
Yeah, is it...
2:50
Thank you so much for kind of what I'm thinking.
2:52
She's picking out what it's going out.
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What if I see, is it my lover?
2:55
Let's just start with the...
2:57
With the team cheek.
2:59
The team cheek.
3:01
Yeah, so what is one trend that when we invest, we need to invest for the long term,
3:07
so that we can kind of ride those waves of ups and downs.
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So what is kind of, I guess, a long term trend or theme that you're seeing at the moment
3:18
that people could possibly take advantage of if they want it to?
3:22
Yeah, I mean, the obvious one to say here would be AI.
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And you know, you guys have talked about...
3:28
Yes, go.
3:29
Sorry.
3:30
Artificial intelligence.
3:31
Hi.
3:32
Hey, what is AI?
3:33
I never heard of it.
3:34
Oh my gosh.
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I was actually in the middle of this morning and I just...
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Every...
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I feel like every week or even almost every day I find a new use for it.
3:44
And I'm like, gosh, it kind of scares me but excites me at the same time.
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Sorry.
3:49
Yes, pretty amazing.
3:50
Turning the holiday at Chattu Patit Brilliant.
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I also love it when people haven't got on board.
3:54
And I can show them how amazing it is.
3:57
It's like just a nice at Victoria Harris.
4:00
Like, let me show you.
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She really likes it.
4:03
I saw someone doing it and I was like, why didn't you choose Chattu Patit?
4:05
And they were like, what?
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I was like, come over here.
4:08
I was like, let me show you how much change your life.
4:11
You know, it was like...
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Revolutionary.
4:13
Yeah.
4:14
Yeah, but look, I feel like that trend has been talked about a lot.
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I mean, the only thing I would say about it is, is also, you know,
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deep sick was a real good reminder about how quickly technology can change,
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how quickly things are evolving, how much competition there is in that space.
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And, you know, if you think back to the internet boom and what happened during some 90s,
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is the companies that are kind of initially on the way, you know,
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you can't guarantee there'll be the ones that have been affitting in five or 10 years time
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from this long-term trend.
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So...
4:42
Oh, you're staying?
4:43
Yeah.
4:44
You know, you think that there was a company called Cisco back in the 90s,
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which was, you know, the kind of Nvidia of that's day had a huge share price run up
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and you can see the charts pretty interesting if you go back and look at them.
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And not so.
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Yeah.
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And look.
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Yeah.
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It's still, you know, a good company, but there's a lot of hype and a lot of enthusiasm back then.
5:02
Damn.
5:03
This kind of thing makes it feel really deflated.
5:05
No, it should be like, well, I've missed out...
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Missed out on the video, but there's like, can we so many others there?
5:11
No, no, no, I just missed it in the video.
5:13
Sorry, what?
5:14
I just missed it in the video.
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You know, I think I finally got, I'm like, yeah, got the AI.
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I understand everyone on board.
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And then everyone's like, the train left and you missed it, you know?
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And I just feel like, damn.
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There's many more trains coming into the station, so...
5:31
Yeah.
5:32
And what I said was you never know, right?
5:34
But where I was going with that though is that...
5:36
So we obviously talked about AI a lot.
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Everyone's talked about AI a lot.
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That's kind of the obvious thing.
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The dangerous, somewhat dangerous thing about themes is that everyone's talking about
5:47
that everyone's getting on the bandwagon and everyone's buying into it.
5:51
And that's what we've seen with US technology stocks over the last few years, right?
5:54
They've been dominating the main US equity market indices.
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So you know, the S&P 500, because 500 companies in the US, you know,
6:04
theoretically that index is 500 companies.
6:07
But the trick with that is that they're not equally weighted.
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They're weighted based on the value of those companies that make up the index.
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So the top technical.
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Yeah.
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Top 10 have a disproportionately large make up of the index.
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So when they move, it's like when they sneeze, the index catches the cold.
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Kind of thing.
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Whereas when the bottom ones do it, it's like, they don't move.
6:29
But that's also kind of like what you were saying in the Curve Weekly.
6:32
Well, that's not that long ago.
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With the show Michael Howell.
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That's, that's, we've probably got one of the most constant traders.
6:39
Hmm.
6:40
Actually, I just factored that.
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But we have a very constant traders start market in New Zealand,
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because we've only got 50 companies in the index.
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And one of those is 20% of the index.
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So the US has is constant traded, but it's like a few large companies
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that constant trade there, whereas we've just got kind of one.
6:59
No, I know that AI has been spoken about a lot.
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And I know that you have other trends that we can look at.
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But just for today's conversation, just for this one,
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I would really love to ask you a few questions on AI.
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If that's okay.
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And then we can move on to it.
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So I know, because we're going to get you in a couple more times.
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And then we can go into some other trends next time,
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because my main question with AI, what I want to know, is
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Vic always talks about...
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I feel like I'm going to be throwing my mask off.
7:23
I feel like I'm just absolutely...
7:25
I am in the room though.
7:26
I am in the room though.
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I am in the room to the boss.
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Vic always talks about how markets are forward-looking.
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And I...
7:34
What do you think about patience?
7:36
She thinks that, right?
7:37
Yeah, because because forward-looking is just like,
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no one speaks like that.
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No one says, well, I don't know.
7:43
Why don't you forward-look?
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You know, I'm just trying to see the representation
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of the future state of the world.
7:48
Thank you.
7:49
That's just...
7:50
Love it.
7:51
That's very odd.
7:52
So with that, AI was already a part of the current state of the world.
7:58
So what are your insights or thoughts on this trend of whether or not?
8:06
Have we, like, seen a massive boom?
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And it's kind of going to have a long tail?
8:10
Or are we thinking that we're still really in the thick of this?
8:13
And this could be a teammate?
8:14
Like, I'm just interested to hear your thoughts on that.
8:16
Yeah, I mean, I think it's undeniable we kind of are in an environment
8:20
where we had an AI, but like, you look at the last two years
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of what's been driving US stock prices in equity markets.
8:27
And it's very much been dominated by those big tech companies
8:30
like Amazon and Video, Microsoft, Facebook meta.
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That are exposed to this trend of AI.
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And what it could mean in terms of technology,
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Nvidia's been one of the main beneficiaries
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because it provides kind of the infrastructure in the background.
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So it's the pecs and shovels of the gold mine has been the analogy
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that's pretty well used now.
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And so that's providing a lot of the backbone technology.
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And when you say that, as it is a more just the idea that like,
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if you're climbing up the mountain, the mountain is AI,
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you need your pecs and crampons and stuff to get you up there
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and the crampons being that Nvidia is the chips.
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And so for everyone to use AI, they're kind of a relying on Nvidia.
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Is that sort of what you think?
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Yeah, essentially.
9:12
It's actually an old gold mining analogy, right?
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So, you know, when they like struck gold down on the west coast in New Zealand,
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for example, everyone rushed down there.
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We need pecs and shovels.
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We need pecs and shovels.
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Is there anybody in the video hurry up?
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And they'll be like, we're trying to make more.
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We're trying to make more.
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We can't keep up.
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There's a gold rush, isn't there?
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And it's so funny that they use sayings, lasted.
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I mean, like, when was the last time someone went into the gold rush?
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But it worked.
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It worked.
9:39
Yeah.
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But not necessarily, you know, the question.
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So Deepseek came out and was like, we've got these even better shovels
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and these better picks for half the price.
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And they're more powerful at finding gold effectively.
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It was planted.
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And I was like, oh, hang on.
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We've got these pecs and shovels really good.
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But now these ones are actually better.
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And they can generate just as we can find gold much faster.
10:02
Right.
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It's kind of.
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Okay.
10:05
Yeah.
10:06
We can move on from the gold rush.
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Sorry.
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I'm all over the analogy though.
10:09
No, no, I love it too.
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Sorry.
10:11
Sorry.
10:12
Can we get back to our point?
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So, we've sort of seen the, we've seen a big boom around AI, right?
10:17
You know, going back to the earlier point, those big seven tech companies make up now about 33.
10:23
I think it is 33% of the S&P 500 index by weight.
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So these companies have seen huge share price run out, huge investor interest over the last few years.
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And, you know, you look at US equity market indices and you think these S&P 500 has actually gone up over 50% in the last two years.
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And then one of the biggest drivers of that has been, there's AI technology, big companies associated with that.
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So, so we've kind of seen a lot of the boom.
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The question is, is kind of where does it go from here and who will the ultimate winners and losers be?
10:55
And that's the really tricky bit because as I sort of mentioned before, some of the, some of the obvious ones that are in play at the moment
11:02
might not be the ones that benefit in five or ten years time.
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And what we're seeing is the sort of shifting focus from investing in the picks and shovels,
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investing in the infrastructure or the chips that power some of this technology to actually, how do you monetize this?
11:17
So, we all use chat GPT, don't know who pays for a subscription, pretty token amount.
11:23
You know, for companies like OpenAI, user charges don't often cover the cost of actually developing and running those programs.
11:32
So, how do you, how do you turn this into a profitable business going forward?
11:37
This is so interesting and it's making me feel like I have this insight that I didn't before.
11:43
You explained that, Zoe, in that it's not a question of, are we still in the AI boom?
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Because it is going to continue to grow as we figure out how to use it in society and what jobs and what, you know, infrastructure is needed.
11:57
It's more what element of the AI boom is still to come, like what, how will it evolve?
12:03
Because I think we can all probably agree that AI is going to be a massive part of our lives.
12:08
My question then is, where back to the markets are forward looking comment?
12:13
How do we then think about markets now?
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Because we don't know what's going to be happening or what part of AI is going to evolve or grow or become dominant.
12:25
Then how do we think about it with an investing lens?
12:29
So, the way I'm thinking about this personally at the moment is that you've had a really good run-up
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and you've had a huge amount of enthusiasm, a huge amount of investment, a huge amount of investment particularly
12:39
and, you know, some of the infrastructure side of things.
12:42
The forward looking outlook is pretty positive at the moment.
12:46
People expect these companies to be able to keep generating.
12:49
And these companies have had good profits, you know, good results, good earnings.
12:53
They're expecting those kind of will continue for the next possible future, right?
12:58
Well, it was like if you looked at how much even just like meter Google and Amazon are actually spending on AI
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in the next few years, it's like from like 10 billion to 60 billion.
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Like this is, these companies are still, they're at the forefront of what's going on
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and they're still putting billions and billions of dollars in investment in this.
13:19
So, I think we've definitely still got a long way to run.
13:24
But yes, what does it look like in terms of going from usage to monetization and more commercialization?
13:31
And then also the infrastructure, I think, is a big one.
13:34
You know, it's like who is going to be the front runner to support all this energy that it takes to power these AI platforms
13:44
just like incredible. So, it's effectively housing the gold miners.
13:49
You know, even if it's rushing the accommodations to the accommodation and the water and the electricity
13:55
and like all of that to power these, you know, to support these gold miners.
14:00
And yeah, and then also is that being powered by coal?
14:05
Is that being powered by solar or wind or renewable energy?
14:10
Yeah.
14:11
And that's a really good pivot to, you know, like another thing where we're seeing quite strong potential
14:15
is around infrastructure and investment and, you know, you consider how much energy these data centers need
14:21
and they also need a huge amount of water for the cooling systems at the moment as well.
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And so, you know, there's two things which are quite intensive on resources.
14:30
So, one of the requirements with data centers is often they have to be based on renewable energy.
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So, they have to be able to power themselves essentially without taking out a grade or using fossil fuels.
14:41
The other part is they need a lot of water.
14:43
So, what does that mean?
14:45
Has an impact on where you can send it, pop them?
14:48
Has an impact on the environment?
14:50
Wow, it's all so interesting.
14:51
It must be so fascinating for you to think,
14:53
okay, well, where are they going to be okay
14:55
and maybe this country is going to do really well economically?
14:58
And, you know, like that's so fascinating.
15:00
I don't think I've ever really thought of that job as being fascinating.
15:05
But even just hearing you talk and explain it in a way that makes so much sense to me,
15:10
it's...
15:11
But is it frustrating to not really know the answer?
15:14
It's like you can do so much research and you can have so much insight.
15:17
But at the end of the day, it's kind of like,
15:20
we can't say what's going to happen.
15:22
I think you have to become comfortable with that if you're investing in general though.
15:25
That's...
15:26
You know, no one's got perfect crystal ball foresight.
15:29
You know, it's just been a bit of my time running economic forecast, right?
15:33
And no one ever gets them right all the time.
15:35
Yeah.
15:36
That's a given.
15:37
But, you know, understanding the risks around your view is probably the most interesting part.
15:41
And I think, you know, when you think about the risks around AI and technology companies at the moment,
15:46
there's been a huge run-up, there's been a huge amount of enthusiasm.
15:49
The risk is that they don't manage to live up to expectations,
15:53
which are pretty elevated at the moment.
15:55
So...
15:56
Yeah, I think that's really...
15:57
It's all about your risk.
15:59
And if you're just in BCN1 AI company, that's very high risk.
16:04
It's a very high risk approach to investing in the AI trend.
16:09
The lower risk approach is to invest in a whole range of different AI companies,
16:17
either through an ETF or just by picking a whole bunch of AI companies.
16:21
And that reduces your risk, but you still get exposure to that, the possible trend that's coming.
16:27
Like, you need to decide what your risk tolerance is when it comes to investing,
16:34
whether it's a trend, investing in a trend or it's investing in general.
16:37
I'm just realising how risk I am without actually realising...
16:41
I mean, it's in the media.
16:43
Yeah, I'm like, I thought it was this fun, cool thing, and I'm so clever,
16:46
and I've done this good thing, and now I'm here, and I'm just thinking,
16:48
oh gosh, I actually really, really need to diversify properly.
16:53
Because I really think AI is this, you know, it's huge,
16:56
and I know that it's going to be, but I had never...
16:59
I don't know enough about it to think about the water, the energy,
17:04
like, to be choosing individual stocks without that knowledge is kind of probably a bit silly,
17:10
and I need to take a good hard look at myself, you know?
17:13
Yeah.
17:14
Well, this is what Amlis do all day, every day.
17:16
Is they're looking at, you know, they're taking their video and they're going,
17:19
okay, and what's the value, you know, where are they getting their oil from,
17:23
who are their customers, what's, they're looking at everything.
17:27
Yeah.
17:28
But it's a big old time job.
17:29
Yeah, for the everyday investor trying to figure out how you create
17:31
a really nicely diversified portfolio, it's really tricky, you know?
17:34
It's just kind of this abstract concept, understanding, you know,
17:38
which sectors are actually into length as well.
17:40
Yeah.
17:41
You could pick five stocks that you look kind of randomly associated,
17:45
but actually have quite strong ties or are tied into the same general drivers in the economy
17:50
as each other and therefore actually aren't that well diversified?
17:52
This is actually a really good segue to one of the questions that's coming for you,
17:55
actually, which is, and I'm going to read it because I think that so many people will have a similar question
18:00
or thought around diversification and how you allocate when you don't necessarily have
18:05
thousands to be investing every month.
18:08
So this person's just saying, like I hear so many differing opinions about whether
18:12
I should invest in index funds like ETFs or pack individual stocks like Nvidia.
18:19
What do you think is the best approach?
18:21
If you only have say a hundred a week to invest, how much of it should be going into what asset?
18:27
Look, I think, you know, when you're starting small, it is hard to get the proper extent of diversification
18:32
by investing directly in stocks and individual stocks.
18:35
It's one of the reasons, you know, tempo kind of came into being was because we wanted to solve that problem.
18:40
So looking at actually as a smaller investor, how do you gain proper diversification,
18:47
proper exposure to a range of different market sectors and do that in a way you can easily invest a hundred dollars a week,
18:53
a hundred dollars a month, whatever it might be and grow your portfolio over time.
18:58
You know, they say that realistically to get a good diversification across stocks,
19:03
you need at least 20 to 30 and that's just a sort of average rule of thumb.
19:08
Which is a lot of time.
19:10
20 to 30 stocks, they definitely aren't these.
19:13
Oh my goodness.
19:14
That's a lot of stocks for your average investor to be across and monitor and...
19:19
And to try and then invest in everything and sort of pass your amounts is pretty tricky.
19:24
So, you know, that's one of the reasons that sort of, as I say, tempo came into being,
19:29
was really try to create and take the guess move out of that diversification piece as well.
19:33
We kind of take into account your risk appetite, your time frames and work back from that
19:39
and your preferences as well about, you know, whether you want to have an ESG lens over it,
19:42
whether you want to have specific sectors included or exploded,
19:45
then basically can sort that all out for you and take some of the guesswork out of it.
19:50
I like that element because I think it's hard when you're thinking about investing
19:54
and what you want to put your money in.
19:56
When you then layer over, once you've got the understanding of investing,
20:01
but then you layer over ethical values based, then you layer over,
20:06
like there's just so many elements to it and I think what a lot of people end up just not doing anything
20:11
is because there are so many decisions to be made.
20:13
So, I think that's what's so great about tempo is that when you join,
20:17
you do get to say these are the things that I want to be specific about.
20:20
And someone else can like an expert does it for you, like that's the dream.
20:23
Yeah.
20:24
There's also the, I reckon, like the analysis background or paralysis by analysis
20:27
is when you've been so long thinking about it or like,
20:29
oh, if I'm going to do this, I want to do it properly.
20:31
I need to go and research in video to the Instagram or think about, actually,
20:36
you know, how do I do this properly?
20:37
Do I read all the books first, et cetera?
20:39
Before you get started and those delays are...
20:41
Before you know, it's been five years and you've done that.
20:43
Exactly.
20:44
Yeah.
20:45
You've lost out on five years of regency.
20:47
Yeah. Yeah.
20:48
So it helps, I guess, accelerate or remove that friction or that the kind of the
20:53
unknowns and helps you get that confidence quicker.
20:57
Exactly.
20:58
Tempo is a brand new investing app available in New Zealand.
21:02
And we're so excited to be telling you about how it works and how you can use it.
21:06
So in 2023, Tempo conducted a survey with a thousand Kiwis.
21:11
And they found that 27% didn't know where to start when it comes to industry.
21:16
And that's a lot of people.
21:18
So the great thing about Tempo is that their goal is to take the guesswork out of investing.
21:23
So when you sign up, they ask questions like, how do you feel about the idea of your investment
21:28
that's going up and down?
21:29
Because some do more than others.
21:31
You tell them how much you want to save and they recommend a mix of their funds for you.
21:35
It's guided investing.
21:36
So you're getting investment advice from the experts, which is very, very cool.
21:40
And because they track your goal progress so they can see actually how you're going,
21:44
they can also recommend that you change your investments and the mix of how you invest it over time,
21:49
which is really great.
21:50
So if you would like to try Tempo, you can get a $10 kick start into your account.
21:54
And if you would like to learn more about Tempo, you can head to the link in the podcast show notes.
21:59
Thank you so much.
22:01
Sorry.
22:02
I'd love to.
22:03
I noticed a couple of trends and things that you're seeing and you've been researching that you're excited to share.
22:08
Which should we do a little sneak peak?
22:11
Do you want to say what?
22:12
We're going to talk about it.
22:13
It's like the trend we're going to look at.
22:15
And the next time we come on.
22:16
Yeah.
22:17
Well, I was thinking we could maybe talk about demographics and that sounds like a silly word.
22:20
But basically the fact that we've got aging populations and women are having fewer babies.
22:26
This is our stick.
22:28
We are your statistic.
22:30
Okay, perfect.
22:31
That will be a really good one to speak about.
22:33
Thank you so much, Zoe.
22:34
And yeah, we'll keep you next time on the Tempo Temperature Chair.
22:38
You got it.
22:39
I saw it.
22:40
Thank you so much for joining us for our Tempo Temperature Chicks.
22:48
Really need to brainstorm creatively and not choose names for segments that are very difficult to pronounce.
22:53
But these are essentially conversations to help you understand what's going on in the market
22:58
and really hone in on a specific topic.
23:00
So we hope that you've enjoyed it.
23:02
Next week we're coming back with another one.
23:04
And until then, if you've got any questions or comments, please do write them below on this podcast.
23:08
So, where are you listening to your podcasts?