Did you miss the latest market gold rush? In the 1967 movie The Graduate, the one word was “plastics.” Today it’s two words: “artificial intelligence.”  

Where is this latest El Dorado of the equities market? Well, in the stock of firms like Upstart Holdings (up 393% this year alone), C3.ai (255%), Nvidia (220%), Palantir Technologies (177%), and Meta Platforms (170%). How could anyone have missed this?

Well, let’s take the example of the firm C3, which reports just $266 million of annual revenues on a market capitalization of $3 billion. The term “fool’s gold” might come to mind.

To be fair, there is no question that artificial intelligence technology is going to change our lives in a variety of interesting ways, most of which we don’t know about yet. There will come a time when AI is as ubiquitous and helpful as mobile phones or social media. The problem is that the current pioneers are not guaranteed to be the beneficiaries of this transformation.

We’ve been through this kind of tech mania once before, in the late 1990s, when anything with “.com” after its name soared in price regardless of earnings or potential. Firms were valued not on revenues or profits but on “eyeballs,” which turned out to be a weak metric for predicting future returns or relevancy. Some of the pioneers were later superseded by larger, better-capitalized companies that simply pounced on their turf and took away their market, improving the technology in the process. Remember Ashton-Tate (database technology), WordPerfect (word processing), VisiCalc and Lotus 1-2-3 (spreadsheets), or Netscape Navigator (the Mosaic browser technology)? Chances are you don’t, but all of them pioneered important advances in technology at the time, and investors who bet on them were (to put it kindly) not rewarded.

Betting on the winners of any new technology is nearly impossible; it was impossible back then and it is today. History suggests that the astonishing runups of the early AI firms will, probably sooner rather than later, disappoint. So don’t feel too bad if you missed this latest gold rush.  Most miners, you know, died disappointed and destitute.

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