The Trial Balance is CFO’s weekly preview of stories, stats and events to help you prepare.
Part 1: Leaked details from Elliot Management letter to investors say AI is overhyped
Elliott Management — the notorious activist investor group that made headlines for infiltrating the board of Southwest Airlines despite the company’s “poison pill” attempt to keep them out and, most recently, taking a stake in Starbucks — has unintentionally revealed its position on the AI-powered technology space, according to the Financial Times.
In a letter seen by FT but not published, only referenced, Elliott indicated to its investors a bearish stance on AI, avoiding the “magnificent seven” stocks and saying Nvidia, the largest and most valuable chip manufacturer in the world, is “in bubble land.”
The letter also states AI is overrated, a sentiment many CFOs have been keenly aware of and expressed skepticism about the sustainability of tech companies continuing to push for AI investment.
The letter goes on to say AI is “overhyped with many applications not ready for prime time” and that uses are “never going to be cost-efficient, are never going to actually work right, will take up too much energy or will prove to be untrustworthy.”
These claims come as Nvidia’s stock has fallen more than 20% since June. During that time, it briefly became the world’s largest company with a market capitalization of more than $3.3 trillion before being overtaken by Microsoft and Apple. The stock is still up about 120% this year.
Intel, a competitor of Nvidia in the chipmaking space, also saw its shares tumble 20% but all in one day late last week. Despite receiving $8.5 billion in taxpayer money to bring chipmaking back to the U.S., Intel announced it is cutting 15% of its workforce, amounting to 17,000 jobs, as part of a massive cost-cutting and restructuring plan. Investors responded by selling off the stock in droves.
It’s worth noting that Elliot isn’t advising investors to short these companies. In fact, they referred to the idea of doing such a thing as “suicidal,” according to FT.
If Elliott is correct and investors and large technology companies jumped the gun on AI spending, there are many CFOs and finance leaders prepared to say, “I told you so.”
— Adam Zaki
Part 2: This week
Here’s a list of important market events slated for the week ahead.
Monday, August 5
- S&P final U.S. services PMI, July
- ISM services, July
Tuesday, August 6
- U.S. trade deficit, June
Wednesday, August 7
- Consumer credit, June
Thursday, August 8
- Initial jobless claims, week ending Aug. 3
- Wholesale inventories
- Richmond Fed President Tom Barkin speaks
Part 3: IP management and nonprofit real estate CFO Q&A
This week’s upcoming content on CFO.com includes Q&As with James Rochette of Anaqua and Brad Dodson of the Urban Land Conservancy, (8/6 and 8/8, respectively). Stacey Ryan-Cornelius, global CFO of Ogilvy, will be the subject of this week’s edition of the 6 a.m. CFO series.
