As
the
hype
around
AI
shows
few
signs
of
slowing,
one
analyst
has
identified
several
warning
signs
that
a
correction
could
be
on
the
way.
In
a
research
note
entitled,
“Magic
Money
Tree,”
Richard
Windsor,
veteran
tech
stock
analyst
and
founder
of
research
firm
Radio
Free
Mobile,
warned
that
money
was
flowing
into
the
AI
sector,
“with
very
little
attention
being
paid
to
company
fundamentals
in
a
sure
sign
that
when
the
music
stops
there
will
not
be
many
chairs
available.”
He
outlined
three
recent
events
that
give
him
cause
for
concern:
Cohere
valuation
The
first
is
that
generative
AI
company
Cohere
is
reportedly
on
track
to
raise
funds
at
a
$5
billion
valuation.
That’s
almost
double
its
value
in
June
last
year
when
the
startup
raised
$270
million
at
a
$2.2
billion
valuation.
Windsor
described
this
as
“the
latest
sign
of
…
reckless
abandonment.”
“Cohere
will
now
be
worth
$5bn
even
though
the
annual
run
rate
of
its
revenue
in
2023
was
just
$13m,”
he
said
in
the
note
on
Mar.
28.
He
said
the
compay’s
“valuation
equates
to
a
historic
price/sales
ratio
of
384x
which
indicates
that
investors
have
another
bad
case
of
FOMO
(fear
of
missing
out)
and
are
rushing
into
anything
that
can
be
remotely
associated
with
AI.”
The
company’s
President
Martin
Kon
recently
told
CNBC
that
Cohere
—
backed
by
Nvidia
and
started
by
ex-Google
AI
researchers
—
is
betting
on
generative
AI
for
enterprise
use,
rather
than
on
chatbots.
Inflection
AI
deal
Windsor,
who
for
11
years
covered
the
global
tech
sector
at
Nomura
Securities
before
starting
his
own
firm,
raised
another
“red
flag”:
Microsoft’s
apparent
deal
with
Inflection
AI.
“Another
red
flag
was
Microsoft’s
ability
to
hire
the
CEO
and
70
staff
from
the
AI
start-up
Inflection
AI,”
he
said.
“Things
were
not
going
well
at
Inflection
AI
because
if
the
company
had
been
doing
very
well,
Microsoft’s
advances
would
have
been
swiftly
rebuffed.”
In
what’s
been
described
as
an
”
unusual
deal
,”
tech
giant
Microsoft
has
reportedly
agreed
to
pay
Inflection
AI
around
$650
million
in
cash,
enabling
it
to
hire
the
startup’s
staff
and
use
its
technology.
Amazon
investment
Emphasizing
the
“FOMO
effect”
around
AI,
Windsor
noted
that
even
tech
giant
Amazon
isn’t
immune.
“Amazon
has
thrown
another
$2.75bn
of
its
total
$4bn
commitment
at
Anthropic,
and
I
am
pretty
certain
that
Amazon
will
end
up
acquiring
the
company,”
he
said.
Amazon’s
largest-ever
investment
will
see
it
continue
to
pump
money
into
the
generative
AI
start-up,
which
has
a
chatbot
Claude
that
competes
with
OpenAI
‘s
ChatGPT.
Stocks
to
buy
if
‘forced’
“The
frenzy
continues
but
it
is
one
I
am
perfectly
comfortable
staying
well
away
from,”
Windsor
said
of
the
AI
sector
currently.
If
“forced”
to
get
into
the
space,
Windsor
said
he
would
buy
Nvidia,
noting
that
the
U.S.
chipmaking
giant
has
been
the
main
beneficiary
of
the
AI
hype
to
date.
The
stock
is
up
around
80%
year-to-date
and
240%
over
the
last
12
months.
“Nvidia
is
really
the
only
company
that
is
making
tangible
profits
from
the
current
boom
in
interest
in
investment
in
generative
AI
but
when
there
is
a
correction,
there
will
be
nowhere
for
Nvidia
to
escape,
although
I
suspect
that
it
will
be
hurt
much
less
than
many
others,”
he
said.
He
added
that
he
already
owns
chip
stock
Qualcomm
,
which
is
in
a
“very
good
position
to
benefit
as
generative
AI
starts
to
be
implemented
at
the
edge.”
—
CNBC’s
Kate
Rooney
contributed
to
this
report.
