Jim Thorne, Chief Market Strategist at Wellington-Altus, spoke with Quartz for the latest installment of our “Smart Investing” video series.
Watch the interview above and check out the transcript below. The transcript of this conversation has been lightly edited for length and clarity.
ANDY MILLS (AM): AI’s impact on the global economy is just starting to be felt. What’s your prediction for the future of AI?
JIM THORNE (JT): The street or Wall Street is still in the skepticism phase, and so we are suggesting that investors still, it’s early, and to embrace these companies and to recognize the fact that we’ve got a long, long, long way to go. Well, what it’s going to do, it’s gonna really unleash the power of the computer and thought. It’s going to digitize, it’s going to commoditize and it’s gonna put a dollar value on intelligence. Really, when you think about where we are, we’re actually in 1984, 85, when Nvidia was the Intel, you know where it was, Microsoft was just starting out, right? That’s where we are in this genesis, of this evolutionary process, but what’s different is the rate of change is exponential, so it’s going to hit us faster. So Apple’s going to have an upgrade cycle, right? Dell computers is gonna, basically, we’re have to rip out all the server farms and rewire them. We have to go from a CPU centric world. That architecture that was developed in 1947 has to be ripped out and we have to put in a GPU centric platform and the GPU is Nvidia, and then that all filters through. And now think about all the data that we have, whether it’s Tesla, whether it’s Dell, that data is going to be used to make decisions and to create value.
AM: What is a GPU and what is a CPU? Just to clarify.
JT: A CPU is a very powerful processor that has a limited amount of capacity in dealing with data processing. A GPU is a chip where you can do a ton of parallel processing at the same time. So if you need a chip to basically process a ton of data, it’s a GPU, not a CPU. There are phases in our market where we do not know the size of the total addressable market. Think about we have a company, a biotech company that develops a drug. It solves, it makes us thinner. And there’s that period of time where we’re trying to guess-timate the total addressable market in that period of time when we’re basically figuring out what that market is. Valuation doesn’t matter. Fundamentals don’t matter because we’re trying to figure it out. Janet Yellen’s husband, who is a Secretary of Treasury, is a guy named George Akerlof who won the Nobel Prize, and he questioned the efficient market hypothesis that we use in the market. And he says, when you go through these phases, you’re actually blind betting, right? You don’t know what the value of that used car is. I don’t know what that value of the used car is, but it’s the guy that’s got the best story wins. Okay.
AM: That seems like what we’re doing with AI right now. We’re
JT: Boom!
AM: We’re blind betting.
JT: We’re blind betting.
AM: It’s infinity money, infinity usage.
JT: It will become a bubble. And that’s okay because with innovation, it’s a normal course of business. We aren’t at the point where you’re starting to see the street expectations. So for example, when you look at Nvidia, the PEG ratio of Nvidia is less than one. So in other words, it might be expensive, but you’re, but, but it’s growing faster than what you’re paying for, right? The street hasn’t gotten ahead of itself in terms of earning expectations in ‘26, ‘27, ‘28. Same thing with Dell, same thing with Apple, right? There’s people that are questioning whether or not there’s going to be an upgrade cycle. Andy, in the nineties when, when Microsoft came out with a new Windows version, right? That was based on Intel’s new chip, you and I had to go and buy a new PC. It’s a massive upgrade cycle. So none of this is profound. We’ve seen this before. We are blind betting. Yes, that’s normal. It’s going to be a bubble. Everybody’s freaking out because the breadth of the market is really narrow. Well, look, going back to 1990, 3% of the stocks generated all of the wealth. So that’s from the S&P 500, that’s 15 stocks. The United States is the leader. So the United States is the place to invest. The rest of the world, not so much. Okay? And let’s not make this too difficult and let’s realize the fact that this time it’s not different.
AM: Well, thanks a lot Jim.