Key Points:

• Microsoft’s new AI features raise privacy concerns.
• AI investments might take years to pay off.
• Microsoft faces competition from cheaper AI apps.
• Also: Investors believe they’ve found “The Next Nvidia,” unlock the stock picks for free by clicking here now.

Douglas and Lee discuss Microsoft’s (NASDAQ: MSFT) position as a leader in AI, particularly due to its relationship with OpenAI. They explore recent news about a feature called “Reality AI,” which captures and saves screenshots of user activity. Concerns are raised about privacy and security risks if sensitive information like bank statements or brokerage accounts are unintentionally captured. The conversation then shifts to the broader challenges facing AI, including the potential for overinvestment by companies like Microsoft, the public’s suspicion of AI, and competition from inexpensive apps. They speculate on the future direction of AI in Microsoft products and agree to revisit the topic when Microsoft announces new AI features.

Transcript:

So Microsoft is supposed to be the king of AI among the big tech companies because of their relationship with OpenAI.

You know, it’s sort of this theory that they got into the market before everybody else.

But what’s the news on Microsoft and AI in the last couple of days?

Well, the chatter that I saw is the Reality AI, which is a function that literally captures and saves screenshots that you have.

And so you can always, like say you’re doing lots of searches or you’re looking for specific things on the internet.

My understanding is that it literally kind of takes shots of anything you’re on for a while.

So you could refer back to it.

And the pushback that I read that they could be getting on this is that what if you’re looking at your bank statement?

What if you’re looking at your brokerage statement?

What if you’re looking at anything that has confidential and personal data, and it has like a screenshot of that, and somebody hacks your computer and gets all your data?

So I think that’s the pushback on the Reality function.

This is one of those unintended consequences of AI.

We’re seeing more and more and more of them.

I mean, in our business, in the journalism business,

Every week, some company, either inadvertently or on purpose, says, well, we found articles that were written by freelancers that were AI or, you know, AI, you know, we’re the New Yorker and AI is taking our articles and ingesting them.

And, you know, some of the big, big media companies like The New York Times have cut deals to get royalties from the companies and said, OK,

If you’re going to steal with us, at least at least pay us money for it.

Yeah.

So one of the things that worries me about AI is you don’t know what you don’t know.

And the example you just gave me from Microsoft is a very, very good example.

You capture things you don’t know they’re being captured.

You were told you forget things are getting stealed.

So I think that there’s a lesson here for anybody who is using an artificial intelligence software on any of their devices.

And that is, look at what it actually does, not what the headline is of what it does.

Like, you know, this translates, you know, from Filipino into English.

Also look at, figure out what else it does, because very often it does things that aren’t in the big print, they’re in the fine print.

And you find out after the fact that it’s something you didn’t want at all.

Well, and like we’ve talked about, you know, in recent conversations, Microsoft has sort of hit a wall here.

And, you know, after the big hubbub over there, 10 billion, they put into ChatGPT and all that.

Well, okay.

But then there’s, if you get any negative pushback, like this seems to be getting, that’s not going to help your chances with the big AI push.

In fact, it may even have some people be a little bit suspicious of your AI push and go elsewhere.

Well, the first thing is people are already suspicious of AI.

It’s going to take my job.

My kid’s using it to do his homework.

You’ve got all these things where people say to themselves, I’m very nervous about AI because I don’t know what it really does or will do in the future.

The other thing that worries me about these big tech companies that have put tens of billions of dollars into AI for their companies is, do you get out over your skis?

They’re making these big investments in the billions of dollars.

They’re putting this stuff into a lot of their software.

Nvidia is making a lot of money because you have to have the chips, whether you’re out over the tips of your skis or not.

But it may be that a company like Microsoft invests $20 billion in AI features and functions, and they don’t start to get that back in product sales revenue for two or three years out.

Yeah.

And again, we’re getting to the point where we have to turn the corner.

Because remember, AI is just a growth product of what used to be called big data search, because that’s essentially and ostensibly what it does.

It searches every piece of data everywhere quickly to help form what comes up when you perhaps put in a query or something of that nature.

This is all a growth of big data.

It was the logical growth because once they had the ability to scour everything that’s ever existed, then there was some functionality to it.

But yeah, I mean, what’s Microsoft, if Reality is a no-go, so what’s their next foray into the AI field?

And I’m sure it’ll be installing it on Outlook and their products, their software products.

But other than having a ChatGPT sort of function, which I guess people would be happy to have on there, but you can download it anyway.

I have it on my phone.

I’ve got the free version.

And then there’s a version here for $1.99 a month, which I guess is, I don’t know, it’s more muscular than something else.

Okay.

That is another challenge.

With this kind of AI, why are you going to buy AI features and functions as part of an expensive suite of products or an expensive product if a lot of what you want you can download onto one of these either for free or for a couple of bucks a month?

That’s another challenge for these companies getting into AI is they’re competing with very inexpensive apps.

Yeah.

And what the functionality is going to have to be, it’s going to have to be something like, okay, I spent 199 a year.

I want AI to go into all my financial data, everything I’ve done, and do my taxes.

Okay, I don’t wanna go spend $1,500 at the CPA.

Now that is something where people would go, especially higher net worth people that have complicated returns.

Now that would be something people would like, that would be something that would be helpful, but it would have to…

Or go in and draw me up a complete, my child was just born, and that child would go to college in 2042, give me a complete amount of what every college will cost and how much I have to have.

It has to be items like that that people need.

As a matter of fact, you’ve made me think of things that I’ll ask my AI feature on my phone when we’re done.

Look, Microsoft will announce, I am sure within the next couple of months, which of their major, major products are going to have new AI features that nobody’s ever seen before.

So let’s come back to this when Microsoft starts to announce the suites of products that are going to have, you know, really muscular AI.

Yeah, that’ll be interesting to see because again, unless it’s a really, really incredible function, like searching everything you did over the course of a year to do taxes, nobody cares.

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