Did Time Magazine Just Jinx the AI Trade?

Last week (on December 12), Time magazine named the 'Architects of AI' as its Person of the Year ("POY"). It's an annual tradition going back to 1928, when the magazine's editors select the person(s) "who wielded the most influence in the previous 12 months." Of course, Time is not the publication it once was; it currently has a weekly circulation of around 1 million, down from a peak of 4.1 million in 2003. But Time's POY cover still attracts significant attention. This year was no different, with thousands of news outlets covering the announcement (just ask Gemini!).

This year's selection was about the group of people who are responsible for developing and bringing the transformative technology of AI to the world (or so they want you to believe). The cover, shown above, has the CEOs of leading tech companies in the AI landscape sitting on a steal beam high above midtown Manhattan replicating the classic 'Lunch atop a Skyscraper' photograph from the 1930s. Left to right, it features: Mark Zuckerberg (Meta), Lisa Su (AMD), Elon Musk (xAI), Jensen Huang (Nvidia), Sam Altman (OpenAI), Demis Hassabis (DeepMind, owned by Google), Dario Amodei (Anthropic), and Fei-Fei Li (Stanford). The picture has a deeper symbolism that we'll get to later. But one thing is for certain, since OpenAI debuted ChatGPT in November 30, 2022, the stock market has been on a tear. The tech-heavy NASDAQ has rallied 102% over the past three years largely on the promise of AI. So now, investors are fretting Time may have just jinxed this stock market rally with its 2025 pick. Call it the magazine-cover curse, but as Jim Bianco of Bianco Research noted in an X Post: Time's POY choice has a history of being "an excellent contrarian indicator." Yikes!

The premise behind the indicator is that when a magazine finally devotes its cover to a person, company, or theme, said subject or topic is usually past its peak. This idea was invented by Paul Macrae Montgomery and consisted of three primary rules:

1. The magazine must be mainstream--not a business/economics/finance publication that routinely features emerging capital market trends. 

2. The cover subject is a widely talked about or experienced concept/theme.

3. There must have been significant asset-price gains leading up to the cover.

Check, check, and check (Time, AI, and a sustained AI-fueled stock market rally)! So, is it time to sell Big Tech? Maybe, but before we do let's look at how well this indicator actually performs. Brent Donnelly, President of Spectra Markets, a financial media and analytics company, has done empirical work on the magazine cover indicator construct, including that of Time's POY edition. There have been 98 such covers since 1928 and Donnelly identified eight prior occasions when a corporate head, CEO, or industry was honored and where there was identifiable stock performance to track. E.g., in 2010 Mark Zuckerberg was selected Person of the Year, but Facebook (as Meta was then known) was still a private company. Below is Donnelly's list of Time's chosen corporations, CEOs, and specific industries and associated stock performance prior to and after being featured (click to enlarge):

Source: Spectra Markets

What Spectra's analysis shows is that 87% of the time companies lost value in the 12 months after being 'honored' with the POY recognition. And 75% of the time they kept losing value even after 24 months. Andy Grove (and Intel) was the exception back in 1997 (oh but how the company's fortunes have changed today). While the results appear to validate the magazine cover curse, they are based on a very small sample size. Can we say these results are statistically significant?

To find out, we defined our null hypothesis (H0) as: The average return of stocks featured on Time is not statistically different from the average return of the S&P 500 (the market benchmark) and tested it to see if we could reject the H0. The results are detailed in the table below (click to enlarge).

Source: Spectra and Slickcharts.com for stock and S&P 500 returns, respectively; Mantabye for all calculations.

As the calculated t-statistic for the 12-month case is greater than the critical t-value, we can reject the null hypothesis for that period (though that's not the case for the following 24-month case). The result provides statistical evidence that being selected Time's POY has a negative impact on subsequent one-year stock performance. So, we'll try to keep a close eye on the performances of AMD, Alphabet, Meta, Nvidia, Tesla, and Microsoft in 2026! (Yes, MSFT...while Satya Nadella is not in the above picture, Microsoft owns 27% of OpenAI and its stock price has almost doubled in value since ChatGPT was launched.) 

Back to Spectra Market's table and the Time magazine cover. Brent Donnelly provides important context to Chrysler and RCA's POY selections in 1928 and 1929, respectively. In the late 1920s automobiles were a transformative technology that helped propelled markets higher (sound familiar?) and RCA was "at the center of that tech bubble that led to the Crash of 1929." (During the 1920s, RCA stock rose in price 200-fold, one of the largest increases in the history of the stock market--it would go onto lose 98% of its market value by 1932.) 

Oh, and that famous Lunch atop a Skyscraper photo that the Time POY cover recreates...it was taken on September 20, 1932, on a steel beam of...the RCA Building!

NFTs: The Final Chapter?

Back in the surreal days of 2021 a restless population, flush with pandemic stimulus and speculative fervor, discovered...non-fungible tokens or NFTs. They were unique cryptographic tokens that exist on a blockchain and cannot be replicated--whatever that meant. But who cares? Have money, will play, right? NTFs were irreverent and fun, as exemplified by the sale of a set of Bored Apes NFTs for more than $24 million in Sotheby's "Ape In!" online auction. The NFT craze generated over $40 billion in trading volume in 2021, peaking with artist Beeple's digital work--The First 5000 Days--selling for $69 million! 

Good investments? Umm, you probably know where this is going. As per the Guardian, "a new report by dappGambl that reviewed data from NFT Scan and CoinMarketCap, 69,795 out of 73,257 NFT collections have a market cap of 0 Ether, leaving 95% of those holding NFT collections – or 23 million people – with worthless investments." 

Not surprising then that people are having regrets and looking for someone to blame. In addition to a long list of celebrity NFT promoters like Paris Hilton, Gwyneth Paltrow, Kevin Hart, Snoop Dogg, Serena Williams, Madonna, Jimmy Fallon, Steph Curry, and Justin Bieber, Sotheby's is also apparently at fault. The famous auction house "has been named as a defendant in a lawsuit filed by investors who regret buying Bored Ape Yacht Club NFTs that sold for highly inflated prices during the NFT craze in 2021. A Sotheby's auction duped investors by giving the Bored Ape NFTs "an air of legitimacy"...the class-action lawsuit claims." Sure, no one was trusting Hilton or Curry to be NFT experts, but Sotheby's was supposed to do some vetting? We dunno know...Sotheby's does have an authenticity guarantee but that was not an issue here. If people want to bid something up, it's almost by definition not an auction house's job to interject. But there's a twist...one of the buyers in the auction, it now turns out, was FTX. Does that make a difference, even though no one knew at the time? Seems like a stretch.

Bitcoin Mania

The below chart puts into perspective the march of Bitcoin (the future of currency or this generation's pets.com?) (h/t el-erian)

Nuriel Roubini Has Some Thoughts on Bitcoin

Economist Nuriel Roubini has been a fierce critic of digital currencies like Shitcoin Bitcoin. And he's not backing down even as Bitcoin passes $50,000. He certainly makes some persuasive points as to why we are in a speculative bubble:

1. Bitcoin's not a unit of payment or unit of account

2.  It's not an asset-- no cash flow, no yield, no use, hence no fundamental value (note gold similarly has no yield, but is used in jewelery as well as medical and industrial processes; so has intrinsic value)

3. It has a negative cost to society because of the electricity necessary to "mine" it. It contributes to climate change through higher demand for fossil fuels...it is anti-ESG! In another words, it's worth less than zero.

4. And once goverments start issuing their own digital coins...all these private shitcoins will be done.

5. No reasonable corporate CFO will put their balance sheet at risk with such a volatile security. 

(Oh, and Elon Musk sucks...not necessarily an argument for or against Bitcoin, just a statement of fact).