As technology continues to advance at breakneck speed, one area of advancement that stands out is artificial intelligence, a topic regularly written about by expert Hassan Taher. Understanding the combination of promise, fear, intrigue, technology, and monetary debates around it can be difficult, even in the best of times.
As AI continues to evolve past its basic algorithm conception into intricate neural networks and analytics, it’s following a truly formidable trajectory, with its roots sinking deeply into a range of industries, including health care, manufacturing, and finance. With the financial landscape being impacted by these issues, Taher considered, “Does the compelling history and seemingly boundless potential of AI translate to a safe harbor for investment?”
Combining the best of science fiction and cutting-edge technological advancement, AI grew significantly in the second half of the 20th century. As the 21st century dawned, the increasing pace of technological development moved humanity into a new era, often referred to as digital transformation or the Fourth Industrial Revolution. Covering a diverse range of applications, AI’s impact on socioeconomic factors is undeniable, including enabling machines to comprehend and project vast amounts of data, transforming entire industries, and creating promising and tantalizing investment opportunities for technologically savvy investors. Rather than being a continuation of the usual progress of technology, AI represents a paradigm change that provides unique solutions, industry disruption, and development catalyzation.
Historical Market Disruptions: Cars and Planes
Until the past 150 years or so, travel went at the pace of a horse, sail, or steam engine, constrained by our ability to mine coal, harvest oats, or harness the wind. The disruption caused by the introduction of cars and planes dramatically changed a number of industries, but far fewer are being impacted by digital transformation, which is touching virtually every sector on the planet. Thousands of new businesses sprang to life in the wake of these innovations — and investors, seeing the opportunity for fast growth and financial gains, sank their money into these businesses. However, as with many great innovations, many of these investors were disappointed financially by the outcomes of these companies.
As Hassan Taher pointed out in a recent blog post, “Warren Buffett, the CEO of Berkshire Hathaway, exemplified this conundrum through a stark historical analysis. Notably, despite the automobile industry birthing over 2,000 companies, a mere trio endured the test of time, occasionally trading for less than book value. The airline industry, despite its transformative impact, astonishingly failed to generate an aggregate profit across its historical existence up until a few years ago.”
Finding Lower-Risk AI Investment Opportunities
The digital transformation has moved AI into a niche market that appears ready to take off. The strong media buzz around this niche has catalyzed companies and funds with deep investments in AI technology. For example, Nvidia’s success in AI has allowed market capitalization to pass the $1 trillion mark, creating groundbreaking possibilities for investors. This has caused the rapid creation of a range of AI-focused mutual funds and exchange-traded funds, among other investment opportunities.
But much like the dot-com bust, investing wisely in AI requires a careful approach incorporating a thoughtful direction of the investment while looking at the historical details of disruptive technology as well as the relationship disruption has caused to the chances of success in innovation investments.
Hassan Taher opined, “Despite the ostensibly luminous financial prospects illumined by AI, caution is prudent, particularly when firms, seemingly overvalued, teeter on the precipice of financial perfection. It is imperative to discern that historical disruptors and contemporary innovations like AI may be enticing, yet they do not universally delineate a foolproof investment avenue.
“Thus, especially for retirement investors, ensuring that investment decisions, particularly within the realm of AI, are firmly ensconced within their financial and risk tolerance sweet spots, is paramount.”
He knows that everyone wants to invest in the next Apple, Microsoft, or Google. However, it’s relatively common that people often don’t consider the many failed companies that tried to innovate when personal computers and e-commerce were new but failed, even if they did have better innovations than their competitors.
Rather than choosing to go with the first investment due to a fear of missing out on the opportunity, investors would do well to wait. Instead of jumping on the first major investment opportunity that arises, which could have significantly more risk than reward due to a wide range of factors, it’s better to wait for one that fits their profile. When a company comes along that matches up with its risk tolerance, investment goals, and similar ideals, the investor can miss potentially risky investments in favor of the one that is right for them.
What Hassan Taher Thinks This Means for AI Investments
Though artificial intelligence technology seems to show a glowing potential for financial investment, it’s essential to use caution by looking at history’s lessons with past market disrupters to avoid making enticing contemporary investments due to false confidence in the company.
Though AI seems to have limitless potential, businesses that are leveraging and developing it are susceptible to the same foibles as other businesses, including liability, bad management, legal issues, and similar areas of concern. “While the forward march of AI seems inexorable and its potential boundless, the path to financial prosperity through its investment is mired with both historical warnings and contemporary complexities. The alignment of investment with thorough research, robust financial health, and a comprehensive understanding of the technological and market dynamics of AI becomes pivotal in navigating the enigmatic waters of AI investment.”