2023 will be remembered as the breakout year for artificial intelligence (AI), with credit given to the explosive viral growth of ChatGPT. The ChatGPT broke records when it surpassed over 100 million users five days after launch. This triggered AI mania as companies jumped on the AI bandwagon. Investors jumped headfirst into any stock vaguely involved with AI or had AI in their name or stock symbol like C3.ai (NYSE: AI).

Elastic Demand

So far, AI has been elastic. While companies are tightening their wallets in an “uncertain” macroenvironment laying off workers, they are spending more money than ever on AI to remain competitive. AI leader NVIDIA Co. (NASDAQ: NVDA) raised its quarterly guidance by 40%, driven by unprecedented demand for AI hardware and services.

Its AI chipsets can cost upwards of $40,000 and are on backorder until December.  

Applications for generative AI surged as people found more uses for ChatGPT. Students created AI-generated term papers just as media companies were generating AI-created articles. The paranoia of AI taking jobs and threatening human existence hit a new level. The generative AI battlefront for mainstream dominance pitted two titans against each other.

Battleground Zero

Microsoft Co. (NYSE: MSFT) and its more than $10 billion investment and 49% stake in ChatGPT develop Open.ai versus Alphabet Inc. (NASDAQ: GOOGL) Google Bard-AI. This surged both companies' stocks as they went tit-for-tat with competing media events and presentations, feature launches and press releases.

Each is trying to one-up the other. Microsoft bundling a more advanced version of ChatGPT with its Bing search engine initially yielded a spike in traffic, but its global search market share fell from 2.82% in February to 2.75% in June 2023. Google continues to dominate search with more than a 92% market share.

AI Overload?

According to Reuters, ChatGPT usage faced its first decline in June 2023. Global desktop and mobile traffic to its site fell 9.7% in June, and unique visitors to the ChatGPT website dropped 5.7% from May 2023. There are many reasons for the decline. One reason is that students are on summer vacation, and usage will spike again when they return to school.

If that’s the case, it suggests that ChatGPT’s user audience is more narrow than anticipated.

ChatGPT-Powered Cheating

Intelligent.com found that 1 in 3 college students have used ChatGPT to write papers. A survey of 1,000 U.S. college students showed that a third had used ChatGPT to complete written homework assignments, and 60% used it on over half of their work. The survey found that 3 in 4 ChatGPT users felt it was cheating but used it anyway.

ChatGPT Getting Dumber with Time?

Generative AI and machine learning promote the "learning" and training aspects of the model. The more ChatGPT is used, the more it learns and improves, right? Well, not quite. According to a Stanford and Berkeley study, ChatGPT has been getting "dumber" with newer versions.

The accuracy rate dropped as the researchers asked a series of mathematical questions. ChatGPT 4.0 was 97.6% accurate in March 2023 when asked to identify prime numbers. That same test was applied in June 2023, and ChatGPT's accuracy dropped to 2.4%.

If ChatGPT is always learning, why does it keep reminding us that it only (still) has information up to September 2021? Its data remains almost two years behind. And this is for the premium $20 a-month version.

Google Bard may have more relevant and fresher data, but it could be better when collecting accurate financial data. In fact, it's pretty bad at math altogether. It hasn't learned that any number times zero is zero. This version is free, so you get what you pay for.

Could the fall off in AI traffic be a sign that perhaps AI's "novelty" and hype are starting to wear thin as its limitations become more apparent? There seems to be less evidence that generative AI is actually learning as it goes rather than making up answers along the way.

We'll see if traffic upticks again in September as students return to school and start "writing" term papers again. It's not great news if it does tick up since students are a thin demographic. If it continues to fall, then it's a sign that AI mania may be in the rearview mirror, and investors may want to prepare for it.