The tech sector is like the modern day gold rush

The tech sector is like a modern-day gold rush, Sevens Research report said in its latest note, highlighting artificial intelligence.

“Broadly, what we’re seeing in AI is reminiscent of the 1840s California gold rush,” said the firm.

“Starting at the beginning, the release of Chat GPT was a bit like the discovery of gold at Sutter’s Mill outside of San Francisco in 1848,” added the firm. “The discovery of gold and the debut of Chat GPT shocked the populous and ignited a ‘rush’ to find gold and/or utilize AI.”

Analysts noted that in the early stages of the California gold rush, it was the picks and shovels companies that made fortunes, selling digging equipment to prospectors, and now semiconductor companies are those picks and shovels of the AI gold rush.

However, semiconductor stocks are not the only picks and shovels, with cloud infrastructure also supporting AI interfaces and computing demands.

“That’s why other tech stocks such as MSFT, AMZN, GOOGL and others have seen their stocks surge,” added Sevens.

However, they warned that most gold rushes eventually turn to busts as there’s “never as much gold as the prospectors think there is.”

“In the end, AI will have to make non-tech companies money, and it’s unclear exactly how many user-end companies will be able to utilize AI to actually 1) Increase revenue or 2) Produce sustainable cost savings,” added the firm.

Analysts stated that if the “Magnificent Seven” are the picks and shovels of this AI gold rush, the remaining 493 companies in the are the prospectors, and if they can’t find enough “gold” in AI adoption, then the “boom risks becoming a bust in the quarters and years ahead.”