Six Takeaways From a Monumental Week for AI

The week of December 1-7, 2024, marked a significant turning point in the world of artificial intelligence (AI), with two major advancements that could shape the future of the industry. On December 5, OpenAI unveiled its o1 model, a shift towards reasoning-oriented capabilities rather than simple prediction. This model aims to emulate deliberate, human-like thought processes, enhancing its problem-solving and decision-making abilities. Not to be left behind in the AI arms race, Google announced the launch of Gemini 2.0 on December 11, highlighting its "agentic" abilities, which enable the AI to autonomously understand, anticipate, and act on behalf of users. In 2025, the AI landscape continues to evolve, edging closer to the existence of true “thinking” artificial intelligence.

These advancements have significant implications for the long-term investment potential of AI-related stocks. Here are six key takeaways from this monumental week for AI:

1. Growing Market Size and CAGR: The global AI market is projected to reach US$243.70bn in 2025, with an annual growth rate (CAGR 2025-2030) of 27.67%, resulting in a market volume of US$826.70bn by 2030. This rapid growth suggests that AI-related stocks could experience significant appreciation in value over the long term.
2. Largest Market Size in the United States: The United States is expected to have the largest market size in 2025, with US$66.21bn. Investing in AI stocks with a strong presence in the US market can provide exposure to this significant market segment.
3. AI's Impact on Productivity Growth: AI could boost US labor productivity growth over a 10-year period, depending on factors like the power of the next generation of AI, the difficulty of tasks it can perform, and the number of workers displaced. This productivity boost can lead to a more productive economy, benefiting AI-related stocks.
4. AI's Role in Diversifying Portfolios: AI-related stocks have outperformed traditional IT indices and specialized AI and robotics ETFs, offering investors an opportunity to diversify their portfolios and potentially enhance returns.
5. AI's Influence on Investment Decisions: The growing significance of AI in investment decisions highlights the potential for AI-related stocks to attract more investment, driving up their value.
6. AI's Impact on the Nasdaq: AI-related stocks have outperformed the Nasdaq, indicating that investing in AI can be more advantageous in the short term compared to traditional markets.

These advancements and their implications for AI-related stocks present both opportunities and risks for investors. The growing market size and CAGR, as well as the largest market size in the United States, suggest strong long-term potential for AI stocks. However, investors should also be aware of the potential risks and volatility associated with the "AI bubble" and the challenges of data management in AI-related infrastructure.

In conclusion, the recent advancements in AI, as highlighted by the six takeaways, have significant implications for the long-term investment potential of AI-related stocks. While these developments present opportunities for investors, it is essential to remain cautious and consider the potential risks and challenges associated with the AI sector. By staying informed and making well-researched investment decisions, investors can capitalize on the growth potential of AI-related stocks while mitigating the risks associated with the "AI bubble" and other challenges.