The genie popped the bottle! After US invests $500bn, are Warren Buffett’s AI fears justified?
Image source: Getty Images
Speaking at the annual meeting of Berkshire Hathaway shareholders last May, billionaire investor Warren Buffett expressed his fears about Artificial Intelligence (AI). Comparing technology to a genie in a bottle, he said: “Part is out of the bottle. We may wish we had never seen that genie, or he may do wonderful things.”
In a few short years, AI has rapidly evolved from a futuristic concept to an integral part of our daily lives. Likening its development to that of nuclear weapons, Buffett is not alone in expressing serious concerns about the potential dangers of AI.
In an open letter written in 2023, Elon Musk, along with more than 1,000 other technology leaders, urged restraint in the development of large-scale AI experiments. The letter noted “great dangers to society and people” that technology sets.
But this past week, it seems those fears have been forgotten.
Change in AI policy under Trump
The rules surrounding AI have already changed significantly under the new Trump administration. After taking office on January 21, he rescinded former President Biden’s 2023 executive order that authorized tighter oversight of AI technology.
The move marks a clear shift toward an innovation-driven approach, with the administration stressing the importance of maintaining US leadership in AI development. I mind it seems the AI will improve either way so it’s best to be ahead of the game.
Although that is very little in the face of potential dangers, it makes sense in terms of national security. Despite the risks, this move is likely to provide opportunities for investors. As the saying goes, “If you can’t beat them, join them”.
AI has its own focus
Trump has brought together three major companies to build Project Stargate, a $500bn AI infrastructure plan. One of them is OpenAI developer ChatGPT and the other two are the NYSE-listed tech giant. The Oracle (NYSE: ORCL) and the Japanese conglomerate SoftBank.
The project aims to accelerate AI development in the US, starting with a data center in Texas. A leading US semiconductor giant Nvidia has already seen its stock jump 5% since the news, making it once again the world’s most valuable company by market value, at $3.6trn.
The Oracle
Oracle is likely to be chosen because of its expertise in cloud infrastructure and data center management. The significant growth in this area highlights its potential to support major AI initiatives, making it a stock worth considering for investors interested in AI exposure.
But its huge debt burden poses a risk. At $94.47bn, it is worth six times equity and ten times cash. This may hamper its ability to finance interest payments, reducing funds available for expansion. It’s not the AI risk Buffett was referring to but it’s certainly one to watch.
Revenue from cloud infrastructure rose 52% to $2.4bn for the Q2 financial quarter ended 9 December. Non-GAAP operating income grew 10% to $6.1bn at a rate of 43%.
“Record-level demand for AI drove Oracle Cloud Infrastructure revenue up 52% in Q2, the highest growth rate of any of our hyperscale cloud infrastructure competitors”said Oracle CEO Safra Catz.
Despite the positive results, the share price fell 8% in December but recovered 16% last week. At $185, it is now close to breaking the all-time high of $192 reached in November 2024.
Source link
