The Hype Around AI Stocks – Is It Worth it?
Why is there hype in the first place?
We’ve all heard about it and now we’re seeing it – the rise of AI in the workplace, at home, and basically anywhere you can think of. The applications seem endless, and the promise that it brings to end mundane tasks for humans is exciting.
Now, no matter whether you’re an eternal optimist like I am, or an AI/robot uprising pessimist like my wife, there’s no denying that there is some serious opportunities in the AI space.
Whenever this happens in any industry and with any new technology, people get really excited to buy in (think Apple stocks circa 1999), but how we take advantage of these opportunities is key.
So how do we do that?
There are really two ways I look at it when trying to take advantage of hype in investments.
The first is through a momentum lens which is to use the hype to buy into stocks that are currently producing the hyped up news. In this case, it would be the producers and sellers of AI and trying to ride the wave of good news.
The problem with this is that momentum can be fickle and speculative and often does a backflip when bad numbers come out. A good example of this is marijuana stocks in Australia over the last few years. Great hype, no real results.
The second is through the secondary market view. What I mean by that, is who is going to actually benefit from the hype? Sometimes this marries up with the momentum but often not.
A good example of this is the dot com boom which saw most companies who traded in websites having inflated valuations which came crashing down, but the underlying technology was able to be used to create the likes of Google and Yahoo as well as Amazon.
So what could we be looking for?
My take on the AI hype is that there is currently a race to create an artificial intelligence that can support people and business. As someone who is trying out a lot of different AI and multiple different applications for it, most of these are still pretty disappointing.
We are really close to having an AI engine that can reliably help people and business and integrate well with current systems, but we have no real way of picking the winner (or even the runners up) of the race.
What I am looking for in the current space are businesses that have the ability to supercharge their earnings or profit once that key has been cut or, who will be the main suppliers in helping to produce the goods needed for the computing and continued development.
Final thoughts
I think that is a long-winded way of saying that no one has a crystal ball and picking the best AI stock to purchase is anyone’s guess at the moment. Looking for any opportunities in the markets come with their risks, and no one knows how things will turn out in the long run, no matter how promising they look right now. It is often the best bet to either find those areas that will profit from the invent as a whole, or who will flourish alongside the new tech.
If you would like any help or more information, don’t hesitate to get in touch with us. You can book directly in with me here. Check out some of our other posts and articles that might interest you on current topics, like this one here.