Now that ChatGPT has triggered a storm of interest in artificial intelligence investing, it may be time for investors to urge some calm. Since OpenAI’s ChatGPT was made available to the public, investors have placed bids on any stock in circulation. Microsoft, which announced an AI-powered version of its Bing search engine, has jumped more than 12% to start the year, bettering the S&P 500’s more than 7% gain. Meanwhile, competitor Alphabet is about 10% higher. Chip stocks are also riding the wave of interest, with the iShares Semiconductor ETF up more than 23% this year. and nvidia? A massive increase of 55% this year. Not to mention other stocks on the trend such as C3.ai, which has more than doubled, surging 128%. Audio and speech recognition stock SoundHound AI skyrocketed 121%. AI YTD Mountain AI software provider C3.ai saw its stock more than double as investors hopped on artificial intelligence trends. Nevertheless, investors should exercise some caution. While AI is promising, there are pitfalls to navigate as with popular investment trends in the past. While AI has been around for some time, the technology is expensive, and difficult for companies to scale up. “It’s still early days and I think it’s still too risky and speculative to bet on individual companies, especially unprofitable ones,” said Irene Tunkel, chief US equity strategist at BCA Research. Here’s a bear case for Artificial Intelligence. It’s expensive Users may find ChatGPT’s human-like responses to poems written in the style of William Shakespeare impressive, but the computing power required for those responses will make generative AI difficult for many companies to profit from. Take ChatGPT’s cost per query, which Morgan Stanley’s Brian Novak estimated last month would amount to anywhere from $0.004 or $0.044 to 2 cents on average, depending on the size or complexity of the query and response. That’s nearly seven times the cost of running a typical Google search, which Novak estimates at $0.003, or not even half a cent. That would make the cost of building generative AI capabilities “significant” for Google-parent Alphabet, let alone any other company trying to build a language processing model. “To the extent that AI/natural language models like ChatGPT penetrate search, we estimate every 10% of GOOGL search queries in ’25 are replaced with a natural language query (similar to ChatGPT) will add ~$0.6bn-11.5bn for [operational expenditure] “Depends on the wording of the per query result,” Novak wrote. Worldwide engine market share according to data from web traffic analysis firm StatCounter. Microsoft’s Bing on the other hand? Just 3%. And other competitors such as Yahoo!, Russia’s leading search engine Yandex, or China’s Baidu have even smaller parts of the global pie. “I think it’s worthwhile for Microsoft to pursue this, because I don’t think Google’s doing is right by any means, and I think there’s a use case for OpenAI,” said Pat Skosik, senior portfolio strategist at Ned Davis Research. The chatbot that is being used is a better mousetrap than the Google search engine. “But outside of Microsoft, I question how many companies have the technology and the resources and the profitability to make money,” Tsosik said. The dangers of AI gaffes Meanwhile, there are other challenges. Since generative AI is only known to be as good as the large sets of data it is trained on, there can be limits to the accuracy of its responses. This is a point Alphabet has discussed with its own showed an incorrect answer to a prompt for AI chatbot Bard. Separately, the lack of proper citations from Generative AI could mean future lawsuits for AI companies. While ChatGPT can generate its own responses to everything to scour websites for data, to avoid duplication of The material will need to be sourced properly. “At least Wikipedia is good about citing the source of everything,” Chosik said. “But ChatGPT isn’t listing any sources for its responses, and it’ll probably be something that comes up down the road.” Here’s how to invest in AIAI ETFs as the ChatGPT craze heats up. Here’s what to know before jumping in Morgan Stanley: These stocks will benefit from the AI boom Heavyweight tech battle: How Microsoft and Alphabet pitted against each other in the AI war According to Chosik, The strategist hopes investors can find companies that take advantage of trends in business, health care and more. “It takes a long time to develop the technology,” Skosik said. “But if there’s money to be made, you know, these companies will do it. It’s not impossible.” However, choosing those companies will be challenging for investors, which is why Tunkel of BCA Research said investors are better off buying AI exchange-traded funds or pooled investments. “I’m absolutely confident about its future,” Tunkel said, but added, “I don’t think it’s possible to pick a winner here.”