Diary of a Money Manager, ep. 47
Corrections & Grahamifications
1.27.2025
Today Nvidia investors suffered the biggest single-day loss in the history of markets—$589 billion—while other AI-related stocks also crashed, er corrected. This as the ever resourceful Elon Musk created a new use for artificial intelligence, as an artifical deal sweetener (see above).
What befell Nvidia stock is a low-cost Chinese AI program called DeepSeek topping the App Store charts. President Trump has termed it a “wake-up call” and burned investors may blame the government and/or media for their collective ignorance. Nearly every day, The Wall Street Journal predicts the imminent collapse of what is inevitably portrayed as a byzantine Middle Kingdom, a place very few of its readers have actually visited themselves. And just last month, the US Commerce Secretary—a former governor of Rhode Island(!)—assured the country that her administration’s trade embargoes had held China back years, if not decades, behind the US.
Oops.
I don’t know if the Chinese are ahead or behind or level with us when it comes to AI, and I don’t think anyone else does either, because AI is a nascent technology, which is to say it is still mainly an idea. I understand that this is not the way techies see it. They have already proclaimed the end of large language models and the dawn of something called “agentic AI” that will supposedly replace human beings very soon. And they have their metrics for the new new thing but in the collective conscience, agentic AI is a bizarre and ubiquitous television ad for Salesforce in which a solo Matthew McConaughey eats dinner outside during a rainstorm in downtown Los Angeles—because the restaurant did not use agentic AI, or something.
I digress. The point is that the further one gets from a profitable product, the more speculative the investment. AI’s next step is to become an application—and something more than a party trick—which will then have to become a product, which must then become a durably profitable product. Mostly what we have now is a handful of tech titans—Sam Altman, Elon Musk, Mark Zuckerberg, Larry Ellison, Masayoshi Sun, Satya Nadella, Marc Benioff, Jeff Bezos, etc.—promising to spend hundreds of billions of dollars in order to revolutionize the way we live and work. Well, okay, but branding still isn’t a product. I’m not sure it’s even a “bet,” which is Bloomberg’s characterization (see above). A bet requires a quantifiable set of outcomes, doesn’t it?
Also, the companies involved are not start-ups (as during the dot-com craze) but the most valuable companies in the world. They remind me a lot of legacy car manufacturers who, egged on by politicians, spent their profits trying to become Tesla. And failed because they didn’t understand what they were betting all that money on. Relevance? Charging your home with your pick-up truck? Saving the planet?
Not even Apple, the world’s most powerful brand, could figure out how to do EVs after years of trying. Or else they couldn’t make the economics work. More likely, however, they just didn’t want to be branded as an EV company any more than as an AI company.
Apple’s shares closed up more than three percent today. No sweetener required.
Moving on…
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