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A demonstration by OpenAI this week underscored the (horrifying, for some) speed at which artificial intelligence is developing and also the undeniable usefulness of new AI applications. BofA Securities analyst Wamsi Mohan discussed related investment opportunities, with a focus on Apple Inc., which he rates a buy.

The predictably folksy and non-scary demonstration emphasized the increased speed and vastly improved voice interface of GTP-4o. The AI companion invented and read a bedtime story and quickly translated languages. It can sing. It can tutor high school students in math. It will be free of charge, unlike GPT-4.

The biggest AI-related question in the tech business world is whether Apple will license Alphabet Inc.’s Gemini AI models or sign a deal with OpenAI. It may use both technologies.

Mr. Mohan expects that Apple will dominate “AI at the edge’ or the use of AI in mobile devices, along with Samsung. This will prove another growth driver for a company already wealthy enough to announce a US$110-billion stock buyback. The availability of AI on new model iPhones may result in a much bigger upgrade cycle.

One of the key issues for investors is the extent to which AI can run independently from the cloud where, for now, the knowledge driving GPT-4o resides. An AI program that can run independently of the cloud will require a beefed up iPhone or Android device, driving profit growth for memory and processing power developers.

Mr. Mohan forecasts much higher demand for random access memory (RAM) no matter what happens. The largest providers of RAM are South Korea’s Samsung and SK Hynix Inc. and also Micron Technologies. In the latter case, the stock is already up over 50 per cent since mid-February this year.

Personally, I am using AI more and more. Microsoft’s Copilot app on the Edge browser can, for example, summarize long research reports, immediately explain acronyms and technical terms (which makes technology-related reports far more useful by saving 45 minutes of Googling) and find data sources.

There is a lot of market hype around AI, probably too much. But I believe the tutoring function is indicative of a technology that will prove too useful to stop. Investors will have ample time to identify the equipment makers and AI providers that will benefit most as the industry develops.

-- Scott Barlow, Globe and Mail market strategist

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The Rundown

Retail traders sit out bitcoin rally

U.S. crypto exchange Coinbase reported just US$56-billion in consumer trading volumes in the first quarter of 2024, when bitcoin leapt to record heights close to US$74,000. While that represents a fledgling recovery in retail interest – almost double the level in the final quarter of last year – it’s way below the US$133.75-billion quarterly average during the last comparable rally in 2021. What’s happened to the army of retail traders who used to drive bitcoin’s biggest rallies? Reuters has some explanations.

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What’s up in the days ahead

Jennifer Dowty will be back with a new Q&A with CIBC’s deputy chief economist, Benjamin Tal. He has some fresh views about interest rates, housing and Canadian stock markets.

Click here to see the Globe Investor earnings and economic news calendar.

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