AI is amazing. And it's making investors stupid.

These last few weeks, artificial intelligence went mainstream.

ChatGPT is a remarkable demonstration tool with the ability to capture the fascination of us normals. It shows what the tech is capable of, and doesn’t make it difficult for us to join in the fun and put our own imaginations to work. It brought the hard work of millions of geeks to the rest of us in a way that few experimental technologies can. Microsoft coming along with a $10 billion investment and partnership provided the exclamation point.

Investors have taken notice. Alphabet has lost more than $100B worth of market capitalization in February (so far, I write this on Feb. 9), based largely/entirely on Microsoft adding these new AI capabilities to Bing search. Brace yourselves for a sentence I never thought I would write: Investors are worried Google Search might not be able to keep up with the tech innovation happening at Bing.

Investors have the AI bug. It is hardly limited to Microsoft vs. Alphabet. C3.ai, an interesting but hardly developed little company dabbling in artificial intelligence that has the good fortune to have the ticker symbol “AI” has gone into meme-stock mode this month. The stock was down 14% on Thursday (as I type), but is still up 100% in less than six weeks. On volumes that would make Big Tech stocks blush.

This, obviously, is not normal or rationale. Spare me your theories about how the Discounted Cash Flow models underpinning C3.ai’s valuation have fundamentally changed over the past few weeks. This is all vibes. A new wave has formed.

I’m not here to pour gloom and doom on AI. For one, I am hardly qualified to be called an amateur, let alone expert, on the topic. Head over to Riiv Project for real, intelligent thoughts on AI. And full disclosure: I too am a true believer here. Artificial intelligence is going to fundamentally change the way countless things are done, making them more efficient. Making them better.

But some investors are going to get slaughtered in the process.

At this moment AI, and the ChatGPT phenomenon, is the Chinese spy balloon of public markets.

It is real, it is significant, and yet it has been blown way out of proportion due to its ability to easily assimilate into the zeitgeist. Just like the spy balloon.

A few thoughts, not meant to be taken as stock recommendations:

1.) The Alphabet drop is stupid. The phenomenon that is ChatGPT is new and sprung out of nowhere, but the underlying technology represents an incremental tech improvement that has been telegraphed for years. Native-language search and reply has been part of the discussion for going on a decade. This doesn’t change anything. Rather, it is evidence we are slowly making progress moving in the direction everyone for years has told us we are moving.

2.) It won’t end up nearly as revolutionary as what you are imagining right now. The thing this reminds me of is voice interaction with your phone. Remember how magical Siri was when it was first announced? All of the headlines, all of the predictions about how it changed everything. All the promises of what it can do. And Siri has proven to be no fad. It is still on our phones. We still use it. But it turns out it wasn’t that revolutionary. It was incremental progress. Related to point one, this feels like a repeat of the early days of Siri.

3.) The real progress will happen under our noses and out of the spotlight. Remember 3D printing? And how that was going to change everything? And how when we heard that we thought about the replicators in Star Trek? 3D printing has changed all sorts of industries. It is making airplanes better, and countless other things. And it is doing that because the incumbents, who from the start were the most able to take advantage of the new technology as it developed, have quickly integrated it into their processes. We don’t have replicators in our house, but Boeing can build a better widget. The same thing is going to happen here. This tech will continue to get better, and it will make processes easier and improve all sorts of things. And by the time it happens, we will have largely moved on from the hype.

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None of this is to say that AI isn’t an area worth investing in. There will be fortunes made in AI. There will be companies that use the tech to do amazing things. But that was true long before ChatGPT penetrated society and reached Good Morning America-level awareness. The only thing that has changed is our awareness. The only news here is, we all have a new wave to ride.

The stock market reaction to ChatGPT will be short lived, and will be volatile. Even if you believe in the future of the tech (and I do), ride the wave at your own risk.

Disclaimer: Fits and Starts DOES NOT provide financial advice. All content is for informational purposes only. Stocks mentioned are as reference only, and a mention should not be interpreted as a buy or sell recommendation. The author is not a registered advisor or a broker/dealer. DO YOUR OWN HOMEWORK.