New Google DeepMind Technology has a Mind of its Own

Brace yourself. Artificial intelligence has reached another milestone.

That’s because Demis Hassabis, the founder of DeepMind, says its newest neural networks no longer require human input.

This clandestine Alphabet (GOOGL) unit has been at the vanguard of AI research for a while. But this latest development is groundbreaking.

And the implications for everything from drug discovery to materials design are huge.

At first glance, what DeepMind is doing might seem trivial. Its AI efforts have been largely restrained to what looks like highbrow parlor tricks. Earlier this year, AlphaGo, its strategy game-playing neural networks, became the first program to beat a human Go player. And not just any player — Lee Sedol was an 18-time Go world champion.

The victory made headlines. Go is infinitely more complex than chess. It also stretches the limits of human general intelligence. It’s something researchers found difficult to replicate with machines.

AlphaGo was the product of months of human training, and countless computational hours. When Sedol was defeated 4-to-1, it validated unproven AI theories. It meant current artificial general intelligence structures were enough to replicate high level human intelligence.

And now, DeepMind’s AlphaGo Zero takes this to another level. Researchers presented Zero with the game rules, a board and game piece markers only. There were zero human trainers, zero strategy lessons.

The AI learned Go in 72 hours by playing against itself in 4.9 million simulations. To improve, it had to continuously rethink the algorithms it was generating.

Then researchers matched Zero with AlphaGo. It was ugly. Zero slaughtered AlphaGo, 100-to-0.

It accomplished this with one neural network, four processors and no human helpers. It invented super-successful strategies that humans had never considered. By contrast, AlphaGo needed two networks, 48 processors and months of human coaching.

Some smart people have made pointed observations about the need to govern the speed of AI development. Bill Gates, Elon Musk, Stephen Hawking and others fear military applications. You can imagine the harm a weaponized AI machine might cause if its sole purpose was to kill humans. Now, imagine the same machine endlessly refining its skills, at an exponential rate.

Dictators understand the military opportunity. Vladimir Putin recently said the country that dominates AI will be the leader of the world.

It’s enough to cause Terminator goosebumps.

On the other hand, AI machines unencumbered by human limitations should be capable of astonishing feats. The ability to run endless simulations is only limited by computer power, and that is progressing exponentially. New, ultra-efficient AI chipsets are operational. Next-generation hardware is in development.

It’s a brave new world. Almost anything is possible.

Nvidia Corp. (NVDA) has an entire division devoted to designing AI architectures for the pharmaceutical industry. Researchers are using deep learning to understand vast amounts of bioscience data. They are developing personalized medicine and attacking Parkinson’s, Alzheimer’s and cancer.

DeepMind is using its networks to better understand quantum chemistry. It’s early, but Hassabis dreams of finding a room-temperature superconductor that would revolutionize battery development.

And AI is playing a big role in self-driving cars, network communications, automation and ecommerce.

Investors need to understand the landscape has changed. They need to be aware some sectors will be disrupted, while others will thrive.

They also need to look beyond companies like Nvidia and Alphabet.

Semiconductor equipment and materials companies like Versum (VSM) will benefit. Datacenter component makers and network component and software vendors like Nutanix (NTNX) will blossom, too. This is a big trend with many winners.

My subscribers are sitting on some pretty nice gains in these names: 208% in Nvidia, 43% in Alphabet, 28% in Versum and almost 10% in Nutanix. And there are plenty more gains where those came from. To get in on the next round of profits, join us here.

AlphaGo Zero might not seem like a big deal. It is.

Removing human limitations from software development resets the process. It makes development faster. It means new opportunities for investors.

Best wishes,

Jon Markman