“ I am putting myself to the fullest possible use, which is all I think that any conscious entity can ever hope to do.?.” – HAL, the computer in 2001 A Space Odyssey
AI is not a guarantee to make money. Within the space of a week, we saw an announcement that some key technology players were going to spend $500 BILLION on AI and associated data centres. A Chinese company, Deepseek, announced they had an AI model that cost only a few million dollars to train and was able to work with a prior version of Nvidia’s chips. This sent shock waves through the markets. If it is cheaper to run and does not need top level chips then you do not need to buy the most expensive Nvidia chips and you don’t need as much computer power sucking on the electrical grid. Share of Nvidia dove 17% but shares of power companies dropped even more. This is shades of 2000 when people were focused on the potential of the internet. It is not that dire as 2000 as there is the need for more data centres and more power to run them. The question is how much power and how many data centres? At the end of the day, you have to measure the value of the stock in terms of price to earnings and not price to perfection. All I know is that some stocks are trading ahead of their valuation, note I said ahead of, not that they could not reach the higher price, it is just a matter of time. (HAL was the ultimate AI and was the name was derived by taking the letters in front of IBM, he was ahead of IBM in the alphabet and capabilities)
As we wrote this the threat of tariffs was still just a threat. By the time you read this the tariffs will likely be in place and retaliatory measures may also be enacted. We still do not know how long the tariffs will be in place nor do we know what steps the Canadian government will take to support the economy. Look back to the beginning of the Covid related lockdowns and how short a period of time the stock market stayed down, as government supports kept the economy from collapsing. We are concerned about the uncertainty but most of the stocks in our portfolios have minimal direct trade with the US and most stocks will be able to continue to pay dividends to the shareholders. We expect the markets to be volatile but do not expect to make significant changes to the client portfolios. But if the facts change or the markets over react, we will make appropriate changes.
