AI worth the hype, but don’t get caught up

As artificial intelligence (AI) stocks have cemented their place in investors’ portfolios, warnings have mounted that this “boom” will leave behind both winners and losers.

deVere Group chief executive, Nigel Green, said exposure to AI in investment portfolios is only set to increase in the wake of American AI software and semiconductor company, Nvidia, posting better-than-expected results in its Q1 earnings report.

Nvidia’s shares finished last week nearly 25 per cent higher and added close to $200 billion in market value.

“The dazzling earnings from Nvidia have added more fuel to the already high-octane AI boom,” Green said.

“The Big Tech earnings season was dominated by relentless AI detail. Now this turbocharged semiconductor firms’ results are helping drive the explosion in interest in AI that started back in November 2022 when the Microsoft-backed chatbot ChatGPT took the world by storm.

“It currently has 1.3 billion users. It crossed 1 billion users in March, representing an increase of almost 55% from February to March. This makes it the fastest adopted technology in history.”

Green agrees with broad market sentiment that investing in AI reflects its potential to significantly impact society and global business in the years to come. He said it offers “potential strong returns, risk management, diversification possibilities, and future-proofing advantages because as the use of AI continues to grow and become more pervasive, those companies that fail to adopt this tech may be at a competitive disadvantage”.

However, Green also urged investors to take a cautious approach when it comes to investing in the AI boom to “avoid getting burned”. He recommended investors look to historical examples of investing in innovative technologies to identify more quality opportunities rather than a adopting a “buy everything” mindset.

“AI is already changing the world in monumental ways and, naturally, investors don’t want to miss out. Things are evolving fast and, as ever, there will be winners and losers in this boom.”

“First, rather than rushing to back potentially over-valued, hot new start-ups, stick to the big tech groups. These companies have huge reserves of capital, which means they can invest heavily in the best research and development, plus they are diversified so they are more resilient.

“Second, a good fund manager who will help select winners from losers, allowing you to make informed, balanced decisions to build your wealth.

“Third, remember, the real AI benefits are coming down the line – we’re still very early – so take a longer-term approach to investing in this disruptive, transformative tech. Don’t miss out, but exercise caution.”