Artificial intelligence (AI) has been a hot topic in the tech industry for years, and it’s no surprise that investors are eager to get in on the action. However, despite the hype, experts say that the AI boom has not yet formed a bubble in stocks tied to the sector12. In fact, retail investors have been slow to buy in, leaving more room for upside if and when they do3.
The AI Revolution: A New Era for Investors?
AI is a revolutionary technology that has the potential to transform many industries, from healthcare to finance to transportation. However, only a small group of big-cap companies are currently benefiting from the AI boom4. Experienced tech investors are hunting for undervalued opportunities in an overvalued space, taking a lateral view to back already proven technology companies that might benefit from the longer-term trend5.
According to Mark Hawtin, investment director at GAM Investments, “There’s a question about where we are in that curve with AI, where the hype is so visible. There are ways to get exposure to the (AI) theme without picking something that is highly valued”5.
How to Invest Wisely in AI
Investors who want to get in on the AI revolution should consider investing in big tech companies that are already using AI in their products and services. These companies have the resources to invest in AI research and development and are well-positioned to benefit from the longer-term trend5.
For example, Google’s parent company Alphabet Inc. is a leader in AI research and development, with a focus on machine learning and natural language processing6. Amazon.com Inc. is also a major player in the AI space, with its Alexa virtual assistant and its Amazon Web Services cloud computing platform6.
Investors should also be wary of investing in highly valued AI-themed businesses that might fail. Instead, they should take a long-term view and look for undervalued opportunities in companies that are already using AI in their products and services5.
Conclusion
The AI revolution is not a bubble yet, and there is still plenty of room for upside if and when retail investors buy in. However, investors should be cautious and invest wisely, focusing on big tech companies that are already using AI in their products and services. By taking a long-term view and avoiding highly valued AI-themed businesses that might fail, investors can benefit from the longer-term trend and the potential of AI to transform many industries.
Sources:
1https://public.com/posts/the-hype-in-ai-stocks-isnt-a-bubble-yet-and-little-buy-in-from-retail-9496145853
2https://ca.style.yahoo.com/hype-ai-stocks-isnt-bubble-002136986.html
3https://finimize.com/content/Q29udGVudFBpZWNlOjY1MDA=/sure-this-could-be-an-ai-bubble
4https://realmoney.thestreet.com/investing/stocks/ai-is-revolutionarytechnology-but-only-a-small-group-of-big-caps-are-benefiting-16124761
5https://www.reuters.com/technology/investing-ai-how-avoid-hype-2023-05-26/
6https://investing.com/analysis/the-ai-revolution-a-speculative-bubble-or-a-new-era-for-investors-200638139