Investors must take a cautious approach to the Artificial Intelligence (AI) boom to avoid getting ‘burned’, warns a serial tech entrepreneur and the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organisations.
The warning from Nigel Green of deVere Group follows Nvidia last week shocking the stock market, posting better-than-expected results in its first-quarter earnings report and providing highly positive guidance for the second quarter.
Shares in the world’s most valuable semiconductor company finished the session nearly 25% higher, adding almost $200 billion in market value.
The deVere CEO says: “The dazzling earnings from Nvidia have added more fuel to the already high-octane AI boom.“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.”
It is because of the potential way that AI is expected to impact society and global business that Nigel Green now says that “AI stocks should have a place in most investors’ portfolios.”
Including AI exposure in an investment portfolio offers several possible benefits for investors, such as “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.”
Consultancy PwC has stated that AI-related productivity savings and investments will generate $15.7 trillion worth of global economic output by 2030, almost equivalent to the gross domestic product of China.
However, the deVere boss also urges investor caution. “AI is already changing the world in monumental ways and, naturally, investors don’t want to miss out. “But they must take a cautious approach to the AI boom to avoid getting ‘burned,” he affirms. “Things are evolving fast and, as ever, there will be winners and losers in this boom.”
Nigel Green suggests three tips for investors wanting to increase AI exposure.
“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.”
AI is the future, says the deVere CEO, and we know from the past that early investors in innovative technologies often reap enormous rewards, but a ‘buy everything’ mindset must be avoided.
“Don’t miss out, but exercise caution,” he concludes.