Artificial intelligence (AI) is dominating headlines worldwide as companies embrace the technology, hoping to boost profits and more. However, one entrepreneur is using his extensive experience with AI to highlight not just its benefits but also its serious challenges.
Balancing Hype and Reality in AI
Stephen Wu, founder of Carthage Capital, created an investment fund built on deep expertise gained during his 6+ years as an AI engineer at leading companies like Amazon and Microsoft. Combined with his skills in statistical analysis and experience with startups, Wu is uniquely positioned to see beyond the hype and understand the realities of AI’s promises and limitations.
Wu is now the founder of Carthage Capital, an options trading fund that aims to provide investors with a consistent +30% profit each year. Unlike conventional strategies that attempt to predict market directions, Wu applies AI and statistical modeling principles to make consistent weekly profits by selling options to profit if a stock price stays within a range.
“Investors are correctly recognizing the massive potential of AI, but it’s important to tread carefully,” Wu explains. “The current enthusiasm mirrors the dot-com bubble, where Cisco’s shares surged over 470%, much like Nvidia’s recent gains, only to drop 81% the next year.”
Today’s AI expectations are higher than ever. Amazon, for instance, has already invested $30 billion in AI chips, with plans to spend another $60 billion. Yet, profitability from these projects remains elusive. “In order for Amazon to continue ramping up its AI spending, they’ll need to demonstrate real financial returns at some point. They can’t just keep spending forever without seeing profits,” Wu says.
Wu outlines two possible scenarios:
- Companies might begin scaling back their AI investments if profitability doesn’t materialize soon, which could negatively impact markets.
- If AI adoption and profitability eventually align with expectations, the AI bull run could continue.
“My plan is to carefully monitor AI adoption data and adjust accordingly,” Wu adds, explaining how his investment approach evolves with market trends.
From Tech Innovator to Hedge Fund Manager
After earning dual degrees in computer science and philosophy from Carnegie Mellon University, Wu held roles at Sony and Warner Music Group before joining Amazon in 2017. There, he led a team developing the Alexa Music AI recommendation system.
In 2020, Wu moved to Microsoft, managing AI translation and localization efforts across 20 teams for Azure features. Around the same time, he began applying his AI and statistical modeling skills to options trading and discovered a niche in the options market. After four years of achieving consistent returns, he launched Carthage Capital in 2023.
Since its launch, Carthage Capital has achieved remarkable results, returning 41% profit in 2023 and 30% profit so far in 2024 (as of November).
Looking Ahead
Given the uncertainty surrounding AI-related investments, Wu believes careful analysis is essential. “My approach is designed to make consistent gains while staying mindful of the risks,” Wu says. “We focus on combining statistical analysis with financial insights to make better-informed decisions.”
