In the late 1990s, Fred Hickey, editor of The High-Tech Strategist, drew criticism for his vocal opposition to the market excesses of the time. Referred to as “bubbleheads,” detractors left unpleasant messages on his voicemail. Despite this, Hickey garnered a devoted following among bearish investors. While eventually proven right, he miscalculated when he stated in December 1999 that the tech stock valuations of the era were unprecedented and unlikely to recur in his lifetime. Hickey, who still issues his monthly investment newsletter, now finds the current market environment to be even more irrational, reminiscent of the earlier dotcom bubble.
Since 1987, Hickey has been producing his publication discreetly without a website, distributing it via mail or PDF with an unchanged masthead over the past 25 years. Working from his home in Nashua, New Hampshire, away from the pressures of Wall Street and Silicon Valley optimism, he gathers insights from industry publications, earnings calls (assisted by his son Ryan), and tech contacts. Hickey sees himself as the voice questioning prevailing narratives, akin to the child in Hans Christian Andersen’s tale about the non-existent emperor’s new clothes.
Today, Hickey observes speculative behaviors pervading various investment sectors: a surge in zero-day-to-expiry options dominating the options market, investors habituated to buying every dip due to prolonged Federal Reserve support, the rise of spoof cryptocurrencies as speculative instruments, record-high margin debt, and historically low cash levels in mutual funds. Drawing parallels to the dotcom mania of the late 1990s, Hickey remains wary of the current market exuberance.
The hype surrounding artificial intelligence (AI) has overshadowed other developments, with a significant portion of the S&P 500’s market capitalization attributed to AI-related stocks. While some argue that market exuberance is less pronounced than in the late 1990s due to fewer initial public offerings, Hickey contends that the emergence of private AI firms like OpenAI, with substantial funding and avoiding public scrutiny, indicates a larger AI sector capitalization than the technology, media, and telecom sectors combined at the turn of the century.
While Hickey acknowledged the transformative power of the internet during the dotcom era, he expresses skepticism about the projected impact of AI today. Distinguishing between traditional AI and generative AI, he deems the latter, promising capabilities like curing diseases, writing literature, and boosting productivity, as overhyped. Contrary to optimistic forecasts, Hickey remains critical of generative AI’s practical limitations and its potential to deliver the promised revolution.
Challenging the notion of AI achieving superintelligence through larger models and enhanced computational power, Hickey remains unconvinced by recent advancements in the field. Despite the enthusiasm surrounding AI, Hickey points to persistent errors and limitations in current models, casting doubt on the industry’s lofty predictions for AI’s future.
Drawing parallels to past technological revolutions, Hickey’s skepticism about AI’s transformative potential is echoed by eminent computer scientists who critique the limitations of generative AI. Notably, experts like Yann LeCun, Richard Sutton, and Gary Marcus share concerns about the fundamental shortcomings of current AI models, casting doubt on the industry’s grand visions of superintelligence and transformative capabilities.
Hickey anticipates that the deficiencies of generative AI will eventually be acknowledged, leading to a substantial overinvestment in computing infrastructure and a subsequent collapse in tech profits and valuations, akin to the market downturn experienced 25 years ago.