AI Bubble or Not?
During the last quarterly calls between the CEOs of S&P500 companies and analysts, Artificial Intelligence (AI) was discussed in 36% of these calls. Newspapers are also full of it; not a day goes by that it is not discussed on TV.
Is AI a bubble or not?
I think it is not, and I have plenty of examples of why it’s not. One I want to mention here is the expected growth of this industry for the next six years, namely 37% per year:
A characteristic of a bubble is that fundamental improvements do not support share price increases. The picture above shows that this is the case.
How to invest in AI?
Beforehand, the strategic choice has to be made on how to invest; this can be based on the following:
- Investing in ‘pure’ AI companies or companies, such as Google, Microsoft that play a significant role here
- Large caps vs small caps (and thus smaller companies that generally carry more risk)
- Buying baskets of shares of the three sub-sectors mentioned above
- Note here that you need to know which stocks are in these baskets. In addition, such baskets have many rules, i.e. some may not be sold to residents of certain countries.
- Or buying broader baskets that hold multiple shares from all three subsectors.
The above choices are up to an investor to make, of course. Part of our daily work is to guide you with this. Within our product range of about 60,000 stocks, we have selected about 50 individual stocks that devote a significant part of their business activities to AI. I cannot name all of these here, but if you believe in a specific application, let me know, and I will help you.
A hands-on example
To get a good idea of what such a basket can look like, let me give the example of a basket of the Semiconductors subsector here. A basket in the form of an ETF, like VanEck Semiconductors, invests in as many as 25 Semiconductor stocks. Their most significant investment is Nvidia and TWSC, AMD, Intel, Qualcomm, etc. So, through this one investment, you enjoy the development of the biggest semiconductors in the world.
Conclusion
I believe the AI sector is no bubble and has an expected annual increase of 37%. An investor should be prepared for this, in which several strategic options exist. We are happy to help you fill this in further.
Take a peak at our latest vlog on this subject to learn more or come by Hugo’s on the 27th of March and join us on an exclusive session where Kaspar Huijsman, CEO of Hugo Investing, simplifies the complexities of AI investing.
Kaspar Huijsman
‘’It’s a jungle out there, Trade Saf€’’
Vlogger at https://www.youtube.com/c/hugoinvesting
Podcast https://open.spotify.com/show/6ZsgB344CImYjkvNX1lc3w
Founder of https://hugoinvesting.com/
Founder of https://academy-for-investors.com/
LinkedIN https://www.linkedin.com/in/kasparhuijsman/
Former CEO BinckBank Spain https://www.binckbank.com/hugoinvesting
Former CEO Saxo Bank Spain https://www.home.saxo/about-us
Co-founder Alex Beleggersbank https://nl.wikipedia.org/wiki/Alex_(bank)
The information in this article should not be interpreted as individual investment advice. Although Hugo compiles and maintains these pages from reliable sources, Hugo cannot guarantee that the information is accurate, complete and up-to-date. Any information used from this article without prior verification or advice, is at your own risk. We advise that you only invest in products that fit your knowledge and experience and do not invest in financial instruments where you do not understand the risks.