Mad Hedge Technology Alerts!
Compassion for humanity – that’s all we need – this is the only trait corporate Americans need for bosses like him to employ humans over AI filmmaker Tyler Perry.
That’s all a tall order for corporate tech ($COMPQ) in Silicon Valley which usually prefers not to prioritize compassion for humanity over profits.
That’s bad news for tech workers and we got more confirmation of this trend with Tesla (TSLA) CEO Elon Musk cutting 600 white-collar corporate jobs from the Fremont, California office.
Elon is usually one to be on the forefront of the curve and he isn’t late with the firing means we are just in the first innings of it.
An interview with Tyler Perry led him down the rabbit hole of the future of AI and it wasn’t pretty if you are a W2 worker.
As it relates to implanting AI, the one irrefutable conclusion he could make was that human workers would lose out at the expense of the bosses who would gain.
Over the past four years, Tyler Perry had been planning an $800 million expansion of his studio in Atlanta, which would have added 12 soundstages to the 330-acre property.
Now, however, those ambitions are on hold — thanks to the rapid developments he’s seeing in the realm of artificial intelligence, including OpenAI’s text-to-video model Sora, which debuted on Feb. 15 and stunned observers with its cinematic video outputs.
His productions might not have to travel to locations or build sets with the assistance of technology.
His expansions are currently and indefinitely on hold because of the quick developments of AI.
He might not need to invest in anything at all except some AI additive technology.
Perry said the job losses in his industry could range from writers, actors, sound specialists, builders, designers, architects, and so on.
Human actors are on the chopping block and the only digestible content that will be saved from the bloodbath is live sports which is why premium content like the NFL, soccer World Cup, and Alabama college football fetch astronomical numbers to license these games.
None of that will be replaced by AI, but much of the best of the rest will and the hundreds and thousands of jobs will sink with them.
Perry also described a situation in which he used AI which kept him out of makeup for hours.
In post and on set, he was able to use this AI technology to avoid ever having to sit through hours of aging makeup.
The movie industry won’t need to negotiate with the actor's or writers' unions again, because they are dispensable.
What will happen in tech?
Google and Apple will build products but with much less staff involved.
Compensation expense is about to drop precipitously without warning.
Remember that the dive into AI won’t be a drip, but a waterfall because once one figures out a way to optimize the technology, everyone else follows suit.
The copycats come out of the woodwork and reverse engineering takes hold.
If you thought that Congress is responsible to save the workers then you’ll be waiting for a long time.
Tech executives have been lobbying Washington for a generation, and I believe they will take the side of management.
And in any case, if the government does get involved, they usually make regulations too onerous to hire humans making the situation worse.
What does this mean for tech stocks?
They go higher.
Expenses will take a meaningful dive, dividends and buybacks go up with more cash on hand, and tech stocks comprise an even larger percentage of the overall market.
We have sunny days ahead for the tech sector.
AI WILL HAVE A BIG IMPACT IN THE MOVIE INDUSTRY
Mad Hedge Technology Letter
May 15, 2024
Fiat Lux
Featured Trade:
(MEME MAYHEM)
(GME), (AMC), (NVDA), (SMCI)
GameStop (GME) and AMC (AMC) shares taking off like a bandit from a bank heist is highly advantageous for tech stocks.
Everyone who owns tech stocks maybe doesn’t know that but won’t complain when their shares go up.
This aggressive price action clearly signals to the rest of the stock market that monetary policy is way too loose.
Yes, and I am saying that at Fed Fund rate sitting at 5% today.
It’s a tough job to reign in the inflationary genie after it’s out of the bottle, and the liquidity sloshing around that overflows into a high inflation backdrop means that prices trend up.
That also goes for tech stocks.
Much of that liquidity has found its way into growth tech stocks like Nvidia (NVDA) and Super Micro Computers (SMCI).
It’s also found its way into marginal tech companies like Gamestop and meme movie cinema stock AMC.
Capital wouldn’t be allocated this poorly into mediocre stocks if there was a tighter cap on liquidity which there isn’t.
It was only just the other week in which the US Central Bank slowed the pace of asset run off to their balance sheet which equated to yet another injection of quantitative easing for tech stocks.
What does that mean?
In the short-term, tech stocks are off to the races.
This is a side effect to the easy money policies resulting in 100% moves in AMC and GME.
It’s almost laughable but that is the world we live in.
The moves higher in both stocks, which have since been followed by several trading halts and subsequent paring of gains Tuesday, came after the reemergence of Keith Gill, also known as "Roaring Kitty," whose bull case on GameStop ignited the meme stock rally back in 2021.
Every bull market has its share of excess and mini bubbles, but this only becomes dangerous when it becomes widespread.
Even if interest in ‘meme’ stocks rebounds following a renewed surge in GameStop’s share price, it doesn’t mean that we are at the end of the tech sector’s Bull Run.
It does mean we are very late in the tech cycle, but honestly speaking, we have been late cycle since 2019.
It’s so late that tech companies now have to issue dividends to keep investors onboard.
They used not have to do that because they were growing so fast.
Sometimes tech stocks don’t sell themselves and this is a period when that is so.
The almost 5 year late cycle action has meant that tech stocks are a good bet in the short-run and the underpinnings to this rally has been fortified due to AI mania that has engulfed many of the best and brightest of tech.
Stocks like GME and AMC shouldn’t be experiencing 100% gains in days in this part of the late cycle, not because I don’t like these companies, but because their business models don’t support such price action.
Gamestop sells video games at the mall.
AMC has a failing movie theatre business.
My take from it is that the tech Bull Run is alive and well in the short-term and there is definitely enough capital to stage a summer tech rally.
Hold on to your hat cowboy!
