You Asked, So We’ll Answer
FOQ: So why is everyone talking about an “AI Bubble”?
Short: AI stocks have been going crazy
Long: AI, or Artificial Intelligence, has captured the imagination of the world. What can it do? How will life change? Will the robots take over and kill us all? If the last one happens, it’s on us. Hollywood has given us plenty of warning:
Anywho, one would think there’s money to be made here, and the stock market is just the place (untrue, but the masses won’t hear it!). So in the last few years, AI stocks have been steadily climbing from speculation, although the fundamentals of these companies (like actually making money) are lacking. Those are the ingredients of a bubble, with some extra help from FOMO and our inescapable herd mentality.
Honorable mention/fun fact: Nvidia, driven by the AI boom, is an exception – it makes lots of money – and is now the world’s priciest company at about $5,000,000,000,000 (yep, trillion), which is more the GDP of every country except the US and China.
FOQ: Do bubbles matter?
Short: Nope
Long: Sure, the accelerated rise of prices and the seemingly inevitable collapse thereafter will influence your portfolio. But we have diversification to help defend against any unwanted results. Take the last Tech Boom back in the late ‘90s, one driven not by AI but by the internet. That’s when Amazon and eBay were created. Prices soared. Companies with zero revenue were worth millions. And then the dream ended. The tech-heavy NASDAQ fell over 78%. But a diversified portfolio like what you have now fell only about 10%. That’s a win.
We don’t know how the next bursting bubble will play out, but we have you ready for whatever comes our way.
FOQ: What should I do to prepare?
Short: Nothing
Long: Well, nothing if you’re already diversified. And you are if you are our client. If you happen to own individual AI stocks, we’d likely suggest selling them and diversifying the proceeds. That goes for any individual stocks at any time, but certainly in a bubble. If you made money, think of it as a casino. You hit red on roulette four to five times in a row. It won’t last. Take your money and run. There’s no skill in picking stocks (fact, not opinion), so harvest the fruits of your luck while you can.
Cheers,
Your Great Oak Team