“I've actually not read any books on time management.” – Said Elon Musk

 

Don’t be in denial about artificial intelligence.

The more you fight it – it will fight you back.

It is coming for us and you need to adjust your life accordingly.

That is largely the message I want to convey to readers because the existence of tech companies and how they function has never been changing at such warp speed until today.

Instead of getting all worked up about the hoopla of what it will bring like it is some shiny new Porsche in the garage, we need to get into the weeds to see how it will manifest itself inside the real world.

While the rest of the world still has no idea what artificial intelligence is, tech workers in the Philippines are already living and breathing the new reality every day for better or worse.

The spoiler here is that it is mostly bad for the local workforce in the beautiful island and sovereign nation of the Philippines but positive for the bottom line.

It’s not a shocker that foreign companies don’t like to pay high wages and will even skirt around the low-wage area if they have their way.

Until today, tech workers in the likes of Moldova, Montenegro, and the Philippines were irreplaceable because they represented good value for labor.

Now these workers are getting crushed by the dreaded AI substitute software. 

All of the major players in its vast outsourcing industry, which is forecast to cross $38 billion in revenue this year, are rushing to roll out AI tools to stay competitive and defend their business models.

Over the past eight or nine months, most have introduced some form of AI “copilot.” These algorithms mainly work alongside human operators.

Avasant, an outsourcing advisory firm that works extensively in the Philippines, estimates that up to 300,000 business process outsourcing (BPO) jobs could be lost in the country to AI in the next five years.

In February, payments company Klarna Bank announced AI bots were conducting two-thirds of all customer service interactions, equaling the work of 700 full-time agents.

Readers cannot fall asleep at the wheel by downplaying this transition in the business model of tech companies.

This movement to bots has the potential to save many percentage points of expenses on labor.

I don’t know any CEO who is actively ignoring this hard pivot to software.

For every success story, there will also be failures because let's get this straight, not every CEO or COO knows how to implement and harness the powers of AI.

Not all managers are created equally.

I know it sounds cliché to look at big tech but they are the powerbrokers of the AI industry and unsurprisingly are the ones pouring the most capital into this new technology.

The end results are that only a handful of companies will secure the bounty of profits that AI will deliver.

There will be surprises on the way but Nvidia relaying to investors that the AI narrative is still here is just as important as management talking about how great AI is.

The only caveat I would say is that the honeymoon phase of AI is definitely coming to a close.

Now the real tough sledding starts ahead of us.

For the time being, pick up shares in Nvidia on this nice dip.

 

This is the first blip in quite a while for the chip sector.

It has almost been perfect in the latest leg up in the tech market carried by heavy hitter Nvidia (NVDA).

I don’t think this will have a significant knock-on effect on the prospects of NVDA.

NVDA is an animal of its own and I do believe we will see great earnings and positive forward guidance that could mean the next gasp up in tech stocks. 

Today represents the first black eye for the AI generative movement when short seller Hindenburg research accused Super Micro Computer (SMCI) of “account manipulation.”

There was a three-month investigation and many former insiders were contacted.

Hindenburg research has a pretty good track record calling out tech frauds.

Most of their calls focus on public stocks helmed by predominately Chinese nationals.

SMCI stock crashed 25% on the day, and it is an ominous setup going into Nvidia earnings later today.

Hindenburg said it reviewed various instances that suggested there were ongoing bookkeeping issues within the $35 billion tech firm even after the SEC charged it with "widespread accounting violations" in 2020.

Workers within the company said they faced pressure to meet high sales quotas, even after the company was charged by regulators.

The high quotas incentivized some workers to ship defective products.

Some of Super Micro's partners appeared to do little business outside their relationship with Super Micro. Ablecom, one such partner, exported 99.8% of its product in the US to Super Micro, while Compuware, another partner, exported 99.7% of its product to Super Micro.

Hindenburg also said Super Micro also ramped up exports to Russia after Moscow invaded Ukraine, which violated US sanctions.

Hindenburg highlighted quality concerns among Super Micro's customers, some of whom have turned to alternative suppliers. Tesla and CoreWeave, two of Super Micro's major customers, have inked high-profile deals with Dell over the past year because they found SMCIs products inferior.

The tsunami of bad news for SMCI means it is time to avoid the stock.

The company faces a torrent of accounting, governance, and compliance issues and offers an inferior product and service now being eroded away by more impactful competition.

The accusations are quite structural and investors won’t be able to just turn a blind eye to all of this.

SMCI delayed reporting their earnings at the last second which tells an investor audience that much of the accusation has some truth to it.

There is a lot to solve internally and I don’t think investors should swoop in and buy the dip just yet.

If there is a bounce, it most likely will be a dead cat bounce.

Although not an existential problem, this short seller report will set back SMCI 5 years and that is a long time in the world of tech.

Readers should avoid this chip stock and head to higher ground.

There is a possibility that this is just the tip of the iceberg and the core could find out to be a lot more rotten than first thought.

Readers will be better off sticking with the likes of Nvidia, Broadcom, AMD, and Micron.