Digital assets focused on artificial intelligence (AI) have been skyrocketing since OpenAI’s chatbot known as ChatGPT became an Internet phenomenon and spurred buzz about its future potential.
Nearly all the tokens classified under the AI category by CoinGecko posted at least double-digit moves over the past week ended Friday.
For market-watchers with long memories, it’s reminiscent of other obsessions in the sector.
This includes the phase when initial coin offerings were hot, or when a bunch of companies in 2018 jumped on the “blockchain” bandwagon by reinventing themselves — at least on paper — into crypto-adjacent firms.
The arms race among global tech giants has intensified since ChatGPT took the internet by storm since its launch in November.
Microsoft Corp, which owns a stake in the OpenAI startup behind ChatGPT, showed off how the technology will supplement its Bing search engine.
Not to be outdone, search giant Google quickly showed a novel service called Bard that would incorporate similar AI features.
A slew of Chinese firms from Alibaba Group Holding to NetEase Inc have also announced that they are developing ChatGPT-like services.
ChatGPT has recently shown its prowess in everything from writing poems in the style of Shakespeare to creating stock portfolios. There’s even an exchange-traded fund planned around the concept.
But even for crypto standards, where wild price swings are de rigueur, the surges in AI-linked tokens are eye-popping.
And investors in the sizzling rally in global artificial intelligence-related stocks are now getting a reality check.
Google’s demonstration of its AI chatbot has already underwhelmed investors with accuracy concerns, spurring the biggest drop in its parent’s shares in more than three months.
In China, regulators are warning investors against the frenzy.
At least three companies have received inquiries from local stock exchanges after shares rose more than 30% over three straight sessions last week.
Stock rallies tied to the latest market craze may be a good investment, for fears of missing out. But the frenzy conjures memories of the crypto crazes and even the dot-com bubble in the late 1990s, where investors piled into stocks and asked questions later.
For sure, the economic potential of generative AI systems goes far beyond web search. They could allow companies to take their automated customer service to a new level of sophistication, producing a relevant answer the first time so users aren’t left waiting to speak to a human.
There are limitations, too.
The answers it pieces together from second-hand information can sound so authoritative that users may assume it has verified their accuracy. What it’s really doing is spitting out text that reads well and sounds smart but might be incomplete, biased, partly wrong or, occasionally, nonsense.
As machine intelligence becomes more sophisticated, so does its potential for trickery and mischief-making. Microsoft’s AI bot Tay was taken down in 2016 after some users taught it to make racist and sexist remarks.
Another developed by Meta Platforms encountered similar issues in 2022.
OpenAI has tried to train ChatGPT to refuse inappropriate requests, limiting its ability to spout hate speech and misinformation. But some users have found work-arounds.
In fact, 2022 has been the most turbulent year investors have ever seen for the cryptocurrency market. After peaking in November 2021, crypto assets suffered a $2.2tn wipe-out in the following 12 months, with their combined market value tumbling by 73%, according to data from tracker CoinGecko.
Longer term, AI is no passing fad. The fact that many of the world’s largest tech companies are embracing it is evidence of that.
But times seem still tough for many smaller, emerging tech companies though, especially as the Federal Reserve prepares for more interest rate hikes to fight inflation.