Investing in the AI theme for the long haul. How to pick the winners

107389491 1710862484804 gettyimages 1517344698 platte dkopie

107389491 1710862484804 gettyimages 1517344698 platte dkopie

Artificial intelligence has transformed the investment landscape following the groundbreaking launch of ChatGPT in November 2022. This has prompted investors to allocate funds toward AI-related ventures in search of the next big winners. In 2023, the Magnificent Seven, comprised of major technology players such as Tesla, Amazon, Meta Platforms, Apple, Microsoft, Alphabet, and Nvidia, contributed significantly to the market’s rally.

While the trend continued into 2024, even the top performers eventually faced limitations. Some of this year’s high flyers experienced a decline, dragging down the Nasdaq Composite by over 2%. It is essential for investors to conduct thorough research and understand the risks involved in the AI sector, which is currently facing many uncertainties.

As AI progresses from early-stage winners to second-stage adopters, portfolio managers advise investors to consider specific strategies for long-term investments in the industry. There is no secret formula for selecting AI stocks, but investors should monitor metrics and trends to distinguish between potential winners and underperformers.

When investing in new industries like AI, it is crucial to pay attention to factors such as cash burn, spending habits, and allocation of resources by companies. Additionally, considering government grants, like the CHIPS Act, which supports semiconductor production in the US, can provide valuable insights for investing in chip stocks.

Avoiding blindly chasing high-performing AI stocks and diversifying portfolios are recommended strategies. Investors can consider ETFs for diversified exposure to AI-related stocks rather than concentrating on individual names. Selecting ETFs with high trading volume and low fees, backed by reputable companies, can help navigate the volatility associated with AI investments.

Finally, while ETF gains may not match individual stock surges, they offer lower-risk exposure to the sector. ETFs can also serve as a benchmark for choosing individual stocks in the future, providing a diversified and well-rounded approach to investing in AI.

Since the launch of ChatGPT in November 2022, artificial intelligence has become a major focus for investors. In 2023, the Magnificent Seven, including Tesla, Amazon, and Microsoft, led the market rally. However, even the winners in AI experienced a decline in 2024, with Big Tech names dragging down the Nasdaq Composite. Experts recommend doing thorough research and looking at metrics like cash burn and infrastructure spending when investing in AI stocks. Diversification through ETFs like BOTZ, ROBT, and AIQ can provide exposure to the AI theme without putting all your eggs in one basket. While individual AI stocks can be volatile, ETFs offer lower-risk exposure to the sector. Overall, investing in AI requires careful consideration and a long-term perspective.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

scroll to top