We recently asked SYM’s Chief Investment Officer Andy Popenfoose this question. This is a paraphrase of what he shared. Catch his exact words in the video above.
AI is a major force in the economy.
AI is a major force in the economy. I have been following the developments of artificial intelligence for a long time. What we have witnessed in the last few quarters is that AI is not only a scientific field, but also a practical tool that anyone can use for fun or for work. This creates a lot of optimism and opportunities in the economy, and I think that is justified.
AI doesn’t necessarily impact your investment portfolio the way you may think.
Investing based on that premise of AI being a major force presently is a different story. It is a common fallacy to assume that the most promising sector of the economy will translate into the highest returns for investors. That is often not the case, or even the opposite, because the most optimistic areas tend to have the most overvalued stocks. Those stocks have to deliver extraordinary profits to justify their high prices. In 2023, the main drivers of the market rally have been the stocks that are most directly related to or benefit from AI. That is not surprising, but it does not mean that they will continue to outperform in the future. There are many challenges and uncertainties in the AI space. There could be new competitors that we don’t know about yet, especially in the tech industry where innovation is fast. There could be difficulties in monetizing AI applications, as we have seen with some of the existing tech giants who took years to make their products profitable.
The bottom line.
So, while I am very optimistic about AI as a positive force for society and for everyday life, I would not bet all my money on it as an investment strategy.
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