Over the past few weeks, the world of artificial intelligence (AI) has changed dramatically. What we’re seeing today is the pendulum swinging back from a “build it” mindset that reigned for several decades, to a more robust “prove it” era. This change is indicative of the industry’s increasing focus on showcasing real-world use cases and measurable outcomes from AI technology. Tech sector heavyweights have invested hundreds of billions into AI in that time. This is a positive sign of their intense commitment to furthering this game-changing technology.
Through all of these enormous advances, the monetization of AI is, at best, small. And even today, countless companies still wrestle with the best ways to take their innovations to market and make them a commercial success. The industry is still very much in the processes of working its way through these challenges. There is concern about whether we are in a true AI revolution or a speculative bubble.
At the same time, currency markets have experienced significant volatility in recent weeks. The EUR/USD pair is now offered around 1.1700 suggesting that this key support level will be tested. The GBP/USD has seen flashes of volatility too, blasting back into the 1.3500 area on a worsening US dollar demand picture. This demand has led to a retraction from recent peaks, as GBP/USD bounces back down towards the 1.3500 area.
To date, the US dollar’s bounceback has been respectable, but not extreme—a net positive, given its potential role in other financial market recalibrations. Gold prices have been yo-yoing around $3,370. As of this writing, they are down modestly after zig-zagging from gain to loss to gain. Even with the US dollar bouncing and US yields rising, gold prices are holding up remarkably well. That indicates caution from market participants to see how the more negative economic signals will play out.
Adding to the complexity of these market dynamics are recent comments from Federal Reserve Chair Jerome Powell during the Jackson Hole Symposium. If you read the text of his remarks carefully, you could see that he is willing to ease monetary policy constraints. This had pundits wondering if the Fed would lower interest rates at the next meeting in September. Traders are now vigorously testing the meaning of this dovish jawboning, and how it might color market action in the coming weeks and months.
As the AI industry grows into its adolescence, everyone will have to work harder at showing the advantages of their improvements. The more urgent question is if this AI boom will continue at such a frenetic pace. This uncertainty will undoubtedly impact investment decisions and market strategies in years to come.