Sudden acceleration, not a bubble, is the AI story that investors are missing, says this top researcher

Next year may see a big leap for AI chatbots like ChatGPT, says a top researcher. - sebastien bozon/Agence France-Presse/Getty Images

While Wall Street engages in continued debate about an AI bubble, a rather impressive new AI coding model just dropped on the world — Claude Sonnet 4.5. Give it any task and it will work on that for more than 30 hours.

Parent startup and AI researcher Anthropic, of which Amazon AMZN is an investor, has declared it the best coding model in the world, with many tech enthusiasts fairly excited. That brings us to our call of the day from respected AI researcher, Julian Schrittwieser, who says AI bubble talk is ignoring “exponential” trends.

Most Read from MarketWatch

Generation X is about to face the biggest Social Security decision — and tens of thousands of dollars are at stake for each person Hotel guests are slamming resort fees as ‘the biggest scam in travel’

Schrittwieser, also a member of the Anthropic team, is known for working on AlphaGo, AlphaZero, and MuZero, algorithms that mastered human board and videogames. He also spent a decade at Google’s AI research hub DeepMind.

Here’s the opening volley from the Austrian native on a weekend blog post: “The current discourse around AI progress and a supposed ‘bubble’ reminds me a lot of the early weeks of the Covid-19 pandemic. Long after the timing and scale of the coming global pandemic was obvious from extrapolating the exponential trends, politicians, journalists and most public commentators kept treating it as a remote possibility or a localized phenomenon.”

He sees something similar afoot with AI capabilities and progress, such as observers who point out its mistakes when writing programs and other tasks. They then leap to the “conclusion that AI will never be able to do these tasks at human levels, or will only have a minor impact,” he said.

Schrittwieser summarizes studies showing recent achievements of AI’s capabilities, including a chart from METR, a nonprofit that studies the topic.-

Other studies, he notes, measuring AI model performances show OpenAI’s GPT-5 large language model is “already astonishingly close to human performance.”

Schrittwieser concludes he’d be very surprised to see AI improvements just come to a halt. “Instead, even a relatively conservative extrapolation of these trends suggest that 2026 will be a pivotal year for the widespread integration of AI into the economy,” he said, summing up his main projections:

Schrittwieser’s post was flagged by Tom Lee, Fundstrat’s co-founder and head of research, who discussed it in a Vimeo update to clients. “He’s saying that AI is about to embark on an exponential curve. That’s where the public is pretty complacent on.”

Story Continues

Lee adds that this would “be a jobs killshot,” as he pointed to attention the post was drawing on social media.

Breaking it down, Fundstrat’s Lee says the prediction of exponential AI gains possibly by 2026 means that the return-on-investment upside case for AI is probably being underestimated.

“So that means you want to stick with Nvidia NVDA, the hyperscalers, the Mag Sevens, and then I think it’s going to lead to accelerated infrastructure spending, which is going to be a power demand surge and that’s good for that part of the value chain,” he said, pointing to stocks like GE Vernova GE and Oklo OKLO.

AI spending, of course, has been a hot topic lately.

He also makes the case for investing in cryptos such as bitcoin BTCUSD and Ethereum ETHUSD. (Lee personally chairs a company, BitMine Immersion Technologies, that invests in Ethereum.) He points to research from a16z, a venture-capital firm, arguing crypto will be used to manage parts of what is happening in AI, such as webcrawlers that compensate content creators.

And the prospect for AI-fueled job losses, said Lee, means the Fed will need to keep monetary policy easy.

Read: What to know about October’s market-crash potential — and what you can ignore

The markets

U.S. stocks DJIA SPX COMP are shifting lower as shutdown worries simmer, with Treasury yields BX:TMUBMUSD10Y BX:TMUBMUSD02Y slipping. Gold GC00 is edging toward another record and oil CL00 is under pressure.

Key asset performance Last 5d 1m YTD 1y S&P 500 6661.21 -0.49% 3.11% 13.25% 15.60% Nasdaq Composite 22,591.15 -0.87% 5.29% 16.99% 24.20% 10-year Treasury 4.147 4.00 -11.60 -42.90 41.00 Gold 3896.5 3.05% 10.81% 47.63% 46.68% Oil 63.15 1.30% -1.34% -12.13% -7.53% Data: MarketWatch. Treasury yields change expressed in basis points

For more market updates plus actionable trade ideas for stocks, options and crypto, .

The buzz

Nike earnings NKE are due after the close, and analysts are hoping for signs of a turnaround from recent struggles.

Spotify shares SPOT are dropping. CEO Daniel Elk is stepping down and will be replaced by co-CEOs, and the streaming music provider was also downgraded by Goldman Sachs.

Fed Vice Chair Philip Jefferson said he expects disinflation to continue next year, as he explained why he supported this month’s quarter-point rate cut. Boston Fed President Susan Collins speaks at 9 a.m., then Chicago Fed President Austan Goolsbee at 1:30 p.m.

S&P Case-Shiller house prices are due at 9 a.m., with job openings and consumer confidence at 10 a.m.

A government shutdown is expected to begin Wednesday, with some analysts predicting it could last up to two weeks .

Best of the web

Why Gundlach says it’s a very unusual market — and what bonds he likes now.

Wall Street keeps cool as casino crowd cashes out of risky bets.

Camerawoman captures Scott Bessent’s texts, exposing White House panic.

The chart-

Citadel Securities strategist Scott Rubner shares this chart, citing Fed data, showing that the bottom half of Americans by the net worth have vastly increased their stock-market holdings. Rubner said overall household equity exposure that’s up 542% since 2020 “provides incremental demand” for stocks.

Top tickers

These were the top-searched stock-market tickers on MarketWatch as of 6 a.m.:

Ticker Security name TSLA Tesla NVDA Nvidia GME GameStop TLRY Tilray Brands NIO NIO WOLF Wolfspeed AMZN Amazon.com PLTR Palantir Technologies TSM Taiwan Semidcondutor Manufacturing OPEN Opendoor Technologies

Random reads

China “bone glue” fixes fractures in seconds.

Garden harvest: Tudor gold and silver coins.

What happened when this tiny island lost its internet.

Most Read from MarketWatch

AI power-generation and Trump play Fermi sees strong demand for its IPO

View Comments