MKM’s ‘Black Swan’ List for 2023: AI, Cloud Spending, and ‘Zuckerverse’ (NASDAQ:MSFT) Retirement

MKM Partners’ annual note on internet themes and “Black Swan” events for the coming year focuses on recent developments in artificial intelligence, and analyst Rohit Kulkarni even hands the microphone over to a popular AI to offer his own thoughts on where the focus will be in 2023.

Among the company’s “Black Swan” forecasts it said were made over the past year – what it considers “HILP” or “high impact and low probability” – it notes that 2022 had a significant impact on secular online growth from forward momentum. effect of the COVID-19 pandemic; that Twitter (TWTR) is no longer a public company, as I had planned; and that Apple (AAPL) built its “advertising muscle.” An extra prediction also came true: that Platoon (PTON) saw “unusually high demand.”

No. 1 on his list for 2023 is the adrenaline rush in the “artificial intelligence wars” brought into focus by the AI ​​”chatbot” ChatGPT, which shows thousands of AI use cases (including text, image, audio and digital video). media generation/analysis) alone since a debut in November.

Those “artificial intelligence wars” will escalate as Google (NASDAQ:GOOG) (GOOGLE) and Microsoft (NASDAQ:MSFT) is racing to acquire ChatGPT’s creator, OpenAI, Kulkarni said. (Microsoft was said to be investigating an interested party for a long time increasing its investment this fall.)

Cheerfully, the firm asked ChatGPT for its own Internet topic predictions for 2023, and perhaps unsurprisingly, AI focused on increased use of AI, machine learning, virtual reality/augmented reality, the Internet of Things things, the cloud and cyber security. .

A theme related to 2023 is the expectation that public cloud spending will accelerate next year, Kulkarni said. “Currently, investors expect a continued slowdown in cloud spending, driven primarily by macro pressures and possibly due to the pandemic advancing.” But there are two potential positive catalysts in rising AI/machine learning workloads and another yet-to-be-“unlocked” layer of secular spending coming out of a slowdown.

Other Black Swan themes/predictions include the premise that TikTok (BDNCE) ends banned in the United States; what a ballyhooed Apple’s mixed reality headsets (AAPL) turns out to be a “dud”; that goes to the public via special purpose acquisition companies can outperform traditional initial public offerings and direct listings; and that reopened capital markets will bring big businesses like Stripe (PULL) and Databricks to market after Memorial Day.

In line with last year’s prediction that Twitter (TWTR) would no longer be public, Kulkarni predicts that Pinterest (PINS) and Peloton (PTON) will cease to be independent public companies. Both have seen intermittent media reports of merger/acquisition activity, and “if their stock prices remain under pressure, we wouldn’t be surprised to see such speculation swirl again.”

Retail media networks will grow more than social networks, a shift that would benefit Amazon.com (NASDAQ:AMZN), Uber (UBER) and Instacart (ICART), Kulkarni said. Amazon, meanwhile, will use the M&A activity to expand into security software and applications, he adds.

and meta platforms (GOAL) will “drastically” scale back ambitions for the “Zuckerverse” — its heavily invested plans for a metaverse Internet experience. The companies have doubled their metaverse spending to $120 million by 2022, but “commercial traction remains limited and below expectations” and “If META decides to limit cash burn in the metaverse in the near term, we think the investors would encourage that movement.”