AI Regulation Wheels Are In Motion And Congress Debates Debt Ceiling

TL;DR

• Failure to reach agreement on the U.S. government debt ceiling could mean a default on Treasury bonds – but don’t hold your breath
• AI regulation is set to become a much more important topic, with OpenAI founder Sam Altman one of many testifying before congress on the topic
• For investors, there are many ways to profit from AI advances, including investing the hardware needed to run the sophisticated algorithms
• Top weekly and monthly trades

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Major events that could affect your portfolio

We’ve started to hear a lot more about the debt ceiling over recent weeks. Lawmakers can’t seem to agree on getting it raised, in a game of chicken as both sides of the aisle jostle for some extra ground. Agreement needs to be reached by June 1st, or else the U.S. government risks running out of cash to pay federal workers, keep national parks open and potentially even default on U.S. Treasury bonds.

President Biden has stated that “It would be catastrophic for the American economy and the American people if we didn’t pay our bills” and U.S. Treasury Secretary Janet Yellen has also been sounding the alarm, saying that “It makes me nervous. It would be devastating.” and that a default would lead to a “financial crisis.”

But let’s be clear. This is highly, highly unlikely to happen.

If it did, it would lead to the worst financial crisis in our lifetime. Potentially of all time. The US government has never defaulted on debt before, though there have been government shutdowns when agreement hasn’t been reached on the debt ceiling.

Even if an agreement isn’t reached, it doesn’t mean the government has no money at all. It would just mean that government spending would need to be reduced to match its income, which would still result in major disruption to the functioning of anything controlled by the federal government, including welfare programs and federal workers salaries and pensions.

Should investors be worried? Never say never. But most likely not.

—

More government stuff for the second take this week, but now we’re talking about regulation. Specifically, AI regulation. This has been a topic almost as hot as AI development itself, with a huge number of high profile executives, founders and commentators pushing for the government to step in and create laws around the space.

In March, an open letter signed by 1,800 notable tech experts, including Elon Musk and Apple
AAPL
co-founder Steve Wozniak, even called for a complete pause in AI development over concerns of the power of existing language models such as ChatGPT-4.

Even Sam Altman, the founder of OpenAI, the company behind ChatGPT, has made multiple public comments on his concerns about the future of AI without the right laws in place.

And while no one would ever suggest governments have a tendency to act quickly, the wheels of regulation look to be slowly turning.

Just this week, Altman and many others are testifying before Congress as they look to implement guidelines for AI technology. It’s hoped that these guidelines won’t just cover safety aspects, but also provide on areas such as copyright, with current models using vast amounts of copyrighted material for their training algorithm.

For investors, it’s a space to watch carefully. The winner of the AI wars is necessarily going to be just the company with the best tech, but also the one who manages to offer the best user experience for consumers whilst navigating the yet to be detailed regulations.

This week’s top theme from Q.ai

Regardless of how the regulation plays out, AI isn’t going anywhere. The cat is well and truly out of the bag, with tech companies rolling out new AI features across their existing products every day. Not only that, we’re also seeing a huge influx of new releases and new companies entirely, sprouting up to ride the AI wave.

Of course, there are going to be winners and losers here. The likelihood is that many new AI startups will fail over the coming years, as the industry matures and consolidates. But no matter whether the dominant force in AI turns out to be Google
GOOG
, Microsoft
MSFT
, OpenAI or a brand new company altogether, they all need one thing.

Microchips.

Machine learning models that run AI use a huge amount of processing power. In order to keep up with the complexity and demand of AI technology, companies need a vast number of highly efficient and powerful microchips.

That means that companies that make them are in the box seat. It’s why companies like Nvidia (+117% YTD) and Taiwan Semiconductor (+17.44% YTD) have gotten 2023 off to a flying start, as well as performing surprisingly well over recent years due to the Covid-induced microchip shortage.

To invest in this trend, we’ve got the Global Microchip Shortage Kit, which uses the power of AI to invest in global microchip foundries, automatically adjusting the stocks selected every week based on AI predictions. It’s cutting edge tech, and we’re not just talking about the chips.

Top trade ideas

Here are some of the best ideas our AI systems are recommending for the next week and month.

Yellow Corp (YELL) – The transportation company is a Top Buy for next week with our AI giving Yellow an B rating in Technicals.

Clearfield (CLFD) – The fiber optic cable company is a Top Buy for next month with an B rating in our AI’s Quality Value and Growth factors. Revenue was up 71.8% year over year to March 31st.

Our AI’s Top ETF trades for the next month are to invest in U.S. oil and gas and to short U.S. Treasuries, micro-cap stocks and small-cap stocks. Top Buys are the ProShares UltraShort 20+ Year Treasury ETF, the United States Natural Gas Fund LP, the SPDR S&P Oil & Gas Equipment and Services ETF and Top Shorts are the iShares Micro-Cap ETF and the Vanguard Small-Cap ETF.

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