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The Bot Brief

POSTED 06/19/2022

"There is no force on earth more powerful than an idea whose time has come."     

-Victor Hugo

 

The Bot Brief with Bot in the News:Bot Index vs. S & P 500

Market woes continued as investors faced a 75 basis point increase in Fed Funds with another 75 bps expected this summer. Inflation does not seem to be improving and shortages of a new variety of products have consumers’ confidence reaching all-time lows. Consequently, last week the bellwether S & P 500 declined another 5.794%, placing it officially in bear territory. The Bot Index, likewise, fell, although not as much as did the broader market. The bots were aided by a bit stronger Japanese market and three companies that actually posted gains. Nonetheless, the Bot Index declined 5.34% to take it to levels of 2020.

The largest gain was recorded by NIO Inc. whose stock jumped 14.98%. NIO has been bouncing steadily off its low price of $14.31 in early May to its current price of $20.77. The company has avoided the U.S. delisting that drove down the price during the early spring months and has announced favorable deliveries in May. The company’s new ET7, its smart luxury sedan, delivered 1700 vehicles in May and overall placements amounted to 7024. The company is ramping up production capacity to meet the strong demand for electric cars.

Also gaining traction in this poor market was Faro Technologies who gained almost 3% for the week. Cathie Wood’s ARK Investment Management announced it had doubled its holding of the company.

The Bot Index held two companies who experienced double digit declines during the week. The worst of which was Oceaneering International who declined 18.48% on virtually no news. The other major weak player was Accuray Inc. whose 14.35% decline dropped the stock to $1.79. Below the $2 level the movement of just a few pennies significantly impacts the entire index’s volatility. Generally, the fall below $2 requires removal from the Index and a replacement company in a similar industry.

2020's Decade of Bot Index Performance

The Evolution of AI:

The June 11th issue of The Economist featured a report entitled The World That Bert Built. Despite the unassuming title, the article chartered the course of AI over the past couple of decades. Whereas the original use of AI was to address specific problems or enhancements to the human decision-making process. New super computers with tons of models, parameters, specialized chips and memory capabilities have emerged into a new paradym called foundation models. These models are expected to note that, “AI is moving into its industrial age” which is expected to drive long term productivity growth. With $115 billion in U.S. venture capital assets committed in 2021, leaps in graphic processing, facial recognition, verbal anticipation are supporting self-supervised learning. One interesting concept is that AI can write computer code, enhancing its skills, which then can be improved by AI writing a better code and so on till a near perfection can be attained.

One of the caveats of The Economist’s feature is that supercomputers are so costly that AI may become the realm of a very few corporations and countries. The article noted that even major universities will fall behind the cash burn that is necessary for the AI advances. Such concentration of power and knowledge will likely benefit a few but place others at a disadvantage.

As an aside, one of the components of the Bot Index was prominently featured in the piece. NVIDIA Corp. provides the computer chips that allow the graphics and power for the AI generation.

 

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Member: American Economic Association, Society of Professional Journalists, United States Press Association. Institute of Chartered Financial Analysts, Robotic Industries Association, Member IEEE.

 

The Bot Brief is a weekly newsletter designed for economists, investment specialists, journalists, and academicians. It receives no remuneration from any companies that may from time to time be featured in the brief and its commentaries, analysis, opinions, and research represent the subjective view of Balcones Investment Research, LLC. Due to the complex and rapidly changing nature of the subject matter, the company makes no assurances as to the absolute accuracy of material presented.