IMPORTANT HIGHLIGHTS
Artificial intelligence is not a recent technology. Its prominence increased following the public launch of ChatGPT in the latter part of the previous year. Barry Glassman, the founder and president of Glassman Wealth Services and a member of CNBC’s Advisor Council, suggested that companies at the forefront of AI development might not necessarily be the most promising long-term investments. According to him, the greatest beneficiaries might not even be technology companies themselves, but rather those who utilize and gain advantages from AI-related products and services.
Considering an investment in artificial intelligence? Barry Glassman, a certified financial planner and a part of CNBC’s Advisor Council, suggests that companies currently perceived as “niche” players or leaders in AI might not hold the greatest potential for long-term investors.
Glassman, drawing from his experience, points out that early-stage niche players might not necessarily translate into successful long-term investments.
Artificial intelligence is designed to emulate human cognitive abilities, enabling computers and machines to independently execute tasks.
While not a new concept, the prominence of the technology significantly escalated after OpenAI, headquartered in San Francisco, introduced ChatGPT to the public in November. This AI-powered chatbot gained rapid popularity, with users employing the program for a range of tasks including crafting essays, composing song lyrics, and coding computer programs.
Glassman holds the belief that this technology’s impact will be as revolutionary and disruptive as the advent of the internet. As the founder and president of Glassman Wealth Services based in Vienna, Virginia, and North Bethesda, Maryland, he asserts that AI possesses the capability to revolutionize businesses across the board and reshape our interaction with the world.
Drawing parallels, Glassman recalls how some of the early significant investments in internet-related ventures, like AOL and Cisco, yielded impressive returns for investors in their initial years, but these companies did not retain their dominant positions in the subsequent decades.
During the time of the pandemic, a comparable trend became evident, as noted by Glassman, with companies like Zoom and DocuSign initially witnessing a surge in their stock values due to the increased online activity driven by remote work. However, their stock performance later stabilized, returning to more modest levels.
Glassman anticipates a similar trajectory for the field of AI.
At present, there is a scarcity of niche companies available for public investment. These companies, predominantly in private ownership, are expected to gain greater recognition in the upcoming year, according to Glassman’s observations.
Dan Romanoff, a senior equity analyst at Morningstar Research Services, echoed this viewpoint, stating that investors would likely face challenges in identifying a suitable “pure play” AI company for investment in today’s market.
Instead of aiming for direct investment in AI-focused enterprises, individuals looking to engage with the “AI theme” might opt to acquire shares in robust and diversified companies like Alphabet, Amazon, or Microsoft, which possess wide-ranging business interests that encompass AI, Romanoff pointed out.
Nvidia, a semiconductor manufacturer, has also reaped the benefits of the enthusiasm surrounding AI. Notably, its stock has surged by over 200% this year, making it the top-performing constituent of the S&P 500 stock index during this period.
Nevertheless, there remains uncertainty about whether such companies will sustain their positions as leaders in the AI domain as the technology continues to evolve, according to experts’ opinions.
The primary beneficiaries might not necessarily be technology corporations, but rather those who employ and reap advantages from AI products and services, as highlighted by Glassman.
“Companies indirectly engaged in prominent AI applications might experience more substantial growth than a company like Microsoft, which serves as the backbone for AI,” he stated.
Industries such as biotechnology, pharmaceuticals, and logistics management could undergo revolutionary transformations by harnessing AI, circumventing the need for substantial capital and associated risks, he further explained.
Reflecting on the present landscape, Glassman pondered, “The question to consider is: Which company isn’t integrating AI into its operations nowadays?” He remarked, “And even if they aren’t currently, just give it a year, and the scenario might be different.”
