BuzzFeed and AI are a match made in fad city
Wall Street kicks off what looks like a new version of the dot-com craze
Wall Street sure does love a fad, and it looks as if artificial intelligence may be the next "it" thing. Shares of struggling digital-media company BuzzFeed Inc. soared as much as 200% on Thursday after saying "AI inspired content" will become "part of our core business" this year. It apparently mattered little to investors that the type of content BuzzFeed has in mind includes its signature quizzes ("Try to Identify 8/8 of these Famous Rodents If You Can" or "If You Paid Attention In Third Grade, This Quiz Will Be Incredibly Simple").
Based on the reaction in BuzzFeed shares, it won't be long before all sorts of companies in all sorts of industries trip over one another to announce some new initiative involving AI. Details? Don't bother asking. They'll come later. All you need to know is that we're getting into AI! And it'll be huge!
If all this sounds familiar, it should. Fads have always been a part of Wall Street but seem to have really picked up during the dot-com boom of the late 1990s. Like AI now, iterations of the internet had been around for a few decades, but the technology developed quickly to the point where it became available to the masses.
For the first time, ordinary citizens could plug into the "world wide web" and start surfing. Companies tied to the internet went public and watched their shares soar, with perhaps the most famous being web browsing company Netscape, whose shares rose from $28 to $75 on its first day of trading as a public company.
Sure, everyone kind of knew the internet would be big and change the economy. The problem was that nobody truly knew in what ways or how to make money from it. But that didn't stop companies from trying. Public companies that had no clue how to exploit the internet were suddenly announcing that they, too, were launching an "internet strategy" or even adding ".com" to their names.
Sure, their stock prices may have received a bump, but for every Amazon.com there were probably about a dozen Pets.coms. The dot-com bubble soon burst, and the Nasdaq Composite Index, where many of the newly public internet companies resided, fell almost 80%.
One of the more recent fads centred on blockchain technology underpins the digital currency craze. A blockchain is a digital database, or ledger, used to record information and transactions in a collaborative manner. Like the internet, the technology promises to change the economy.
In 2017, the blockchain was all the rage, and companies rushed to find ways to capitalise on it. Who can forget Long Island Iced Tea Corp., a microcap company and seller of non-alcoholic beverages that changed its name to Long Blockchain Corp. and watched its shares soar as much as 289% in one day. The change didn't help the struggling company, and it was delisted by the Securities and Exchange Commission in 2021.
Special purpose acquisition vehicles, or SPACs, are another fad that can't go unmentioned. Essentially "blank check" companies, these enterprises were made possible by the era of cheap and easy money. The thing about SPACs is that they have no business model; they just raise money from investors through an initial public offering and promise to use the cash to buy a yet-to-be-identified operating business. Yes, it was as speculative as it sounds, and the SPAC boom came crashing down last year once the Federal Reserve raised interest rates at a historic pace.
Will the budding AI boom end in tears as well? For most, of course it will. But that doesn't mean there won't be spectacular winners. It will very likely change the economy and our way of life.
As of now, AI appears to be more like the internet than SPACs. Just this week, Microsoft Corp. said it was investing $10 billion in OpenAI. Bloomberg News reports that OpenAI's artificial intelligence tool ChatGPT has lit up the internet since its introduction in November, amassing more than a million users within days and touching off a fresh debate over the role of AI in the workplace.
AI now feels like the internet in 1996 — full of promise, just in ways we don't know yet. But somehow I don't think we've spent decades developing AI only to use it to develop quizzes about animals.
Robert Burgess is the Executive Editor for Bloomberg Opinion. He is the former global Executive Editor in charge of financial markets for Bloomberg News
Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.