Where should AI sit in investors’ portfolios?

Yasmine Raso

Senior Journalist, Financial Newswire

10 May 2023

The chief executive of global financial services organisation, deVere Group, has suggested artificial intelligence (AI) stocks should be a staple of investors’ portfolios due to an impending “Big Tech boom”.

Nigel Green said, despite the scepticism of AI expressed by Warren Buffett and Charlie Munger of Berkshire Hathaway, last week’s earnings reports from the tech conglomerates including Microsoft, Alphabet, Meta and Amazon showed strong performances.

“Despite Buffett and Munger’s scepticism, Big Tech last week posted robust financial performance reports for first-quarter earnings. The pace of growth has picked up noticeably,” he said.

“But the real story was the tech giants’ seemingly relentless mania for AI. Most of corporate America clearly think that this is the future. The importance of this cannot be overstated considering that just five tech companies have made up two-thirds of the S&P 500’s gains so far this year.

“Besides guidance, which suggests how companies are positioned to manage an economic downturn, and data on how effective cost-cutting measures have been, the Big Tech earnings season was dominated by AI detail. The tech titans are fully aware of the enormous returns that could be secured when AI starts to radically change the way businesses work and consumers live their lives.

“We fully expect that the volume of chat around AI will ramp up in future earnings seasons.”

Green affirmed that adapting portfolios to include exposure to AI investments can offer investors potential strong returns, the ability to diversify, and future-proofed strategies 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”.

“We expect that companies that have substantial AI interests are likely to benefit from the growth of the industry and this could have potentially significant rewards for early investors,” Green said.

“But, of course, like any investment strategy, including AI in a portfolio carries risks and requires careful consideration. Investors should seek professional advice before making any investment decisions.

“We believe that AI is the future, and we know from the past that early investors in innovative technologies often reap enormous rewards.”