Editor's note: Don't get caught flat-footed during this tech revolution... Investors have flooded into technology stocks this year as the rise of AI has provided a massive boost for the sector. But Eric Fry – editor of Fry's Investment Report for our corporate affiliate InvestorPlace – believes this new technology will disrupt the world if it gets into the wrong hands... That's why he argues it's critical for investors to be aware of the dangers of AI in order to understand how to prepare for its potential negative impact. In today's Masters Series, originally from the August 8 issue of Eric Fry's Smart Money, Eric details how AI has risen to prominence this year... discusses AI's potential impact on the markets... and reveals how investors can take advantage of this powerful technology...
The AI Panic Is Coming... Be Ready
By Eric Fry, editor, Fry's Investment Report For the past several months, much of what we've discussed here at InvestorPlace has revolved around artificial intelligence ("AI"). And it's kind of funny that we're here now, isn't it? Before December 2022 – when the titular launch of ChatGPT became the hottest topic both within and without of the markets – AI was merely science fiction. It sounded as far off in the future as time machines, teleportation, or those Food-a-Rac-a-Cycles from The Jetsons that spat out a fresh meal with a few button pushes. But regardless of the fantastical nature of most AI myths, artificial intelligence is here – and it's here to stay. Its implementation across hundreds of products, industries, and companies is only revving up... AI will create passageways to sweeping, even mind-blowing, change. But as it does so, it will disrupt the status quo and leave behind the wreckage of dated technologies and hollowed-out industries. In other words, the future of AI won't be all rainbows and unicorns... it will also be thunderstorms and satyrs. And over the next few months, it's all going to come to a head in the form of an AI panic... Here's what I mean... I don't make hard predictions frequently. And when I do, I don't make them lightly. I devote months – and many times, years – of research to specific topics, peeling away each layer and differentiating fact from fiction, opportunity from overhype. And what's building right now in the AI space is pointing toward a panic that will erupt soon. But before I tell you how and what to do next, let's talk about why AI will create such a massive disruption. And, as we do often, we'll look to the future by looking to the past... As I mentioned earlier, AI will become a world-altering force of both creation and destruction. Many groundbreaking technologies throughout the ages have subjected humanity to Faustian bargains of some sort – usually a "bargain" the inventors of the technologies never imagined. Consider two historical examples... The invention of the wheel produced significant and sweeping benefits. But even this monumental technological advancement would serve sinister purposes down the road. In the Middle Ages, death by the wheel became a notoriously cruel and gruesome form of public execution. During the Iron Age, innovative humans used the metal to make time-saving tools like plowshares and chisels... but they also used iron to make weapons like swords and daggers. The point is technology is an inert tool... until it is in the hands of a human. Then, all bets are off! As Albert Einstein once said about the atomic bomb... The release of atomic power has changed everything except our way of thinking... The solution to this problem lies in the heart of mankind. If only I had known, I should have become a watchmaker. Dr. Geoffrey Hinton, the "Godfather of AI," has been expressing similar thoughts and regrets this year. He made headlines in May by resigning his post at Google, so that he could speak freely about the risks of AI. Hinton has been warning the public that AI could become increasingly dangerous. He worries that AI technologies will upend the job market by replacing professions like paralegals, personal assistants, and translators. Immediately after leaving Google, he warned that future versions of the technology might pose a threat to humanity itself down the road... It is hard to see how you can prevent the bad actors from using it for bad things. Hinton's angst about AI places him in the company of dozens of tech insiders who fear it could lead humanity down a destructive and irreversible path. As the New York Times reports... Gnawing at many industry insiders is a fear that they are releasing something dangerous into the wild. Generative A.I. can already be a tool for misinformation. Soon, it could be a risk to jobs. Somewhere down the line, tech's biggest worriers say, it could be a risk to humanity. After the San Francisco startup OpenAI released a new version of ChatGPT in March, more than 1,000 technology leaders and researchers signed an open letter calling for a six-month moratorium on the development of new systems because A.I. technologies pose "profound risks to society and humanity." Several days later, 19 current and former leaders of the Association for the Advancement of Artificial Intelligence, a 40-year-old academic society, released their own letter warning of the risks of A.I. Even Sam Altman, the co-founder of OpenAI, acknowledges the bipolar potential of AI technology. He has said he fears what could happen if AI is rolled out recklessly into society... yet this fear did not stop the billionaire from rolling out ChatGPT and simply giving it away to anyone who chooses to use it. Elon Musk, who co-founded OpenAI with Altman but parted ways with the company in 2018, complained in February that OpenAI had lost its way. What started as an open-source nonprofit that could serve as a counterweight to Google, Musk explained, has now become a "closed-source, maximum-profit company effectively controlled by Microsoft." Even Warren Buffett has joined the chorus of AI skeptics. At the annual shareholder meeting for Berkshire Hathaway in May, the Oracle of Omaha remarked... [AI] can do remarkable things... like checking all the legal opinions since the beginning of time. It can do all kinds of things. And when something can do all kinds of things, I get a little bit worried because I know we won't be able to uninvent it. Clearly, the launch of ChatGPT has opened a Pandora's box of unbridled AI development. There will be no rules, no moral guardrails, and no powerful overlord to restrain AI's possible excesses. That's part of the reason why I believe that an AI panic will hit the markets by the end of this year. Good investing, Eric Fry
Editor's note: You don't have to be a victim of this AI panic. In fact, you can use the technology to enhance your investment strategy. Imagine using AI to essentially see into the future and predict stock prices 21 days in advance... with a success rate up to 82%... That's the advantage of the powerful new AI system Eric's colleague Louis Navellier – editor of Growth Investor – recently developed. And he just hosted an online presentation to share a live demo of how it works. Learn more here... | 
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