AI drives tech rally — but is the trend here to stay?

AI is, without a doubt, the hottest investment trend of 2023. Is this just short-lived hype, or will AI stocks continue to soar?

AI (short for artificial intelligence) has taken the markets by storm, and everyone seems to be talking about it. Many AI stocks, such as Nvidia, Microsoft, and C3.ai have skyrocketed, capturing the attention of retail investors and fund managers as well as big corporations looking to leverage the technology and its investment potential. 

Let’s take a look behind the buzz, and see what the rise of AI could mean for your portfolio.

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AI’s pivotal moment

The concept of AI is not that new, but what really brought it to the fore was the launch of ChatGPT this past November. The AI-powered chatbot racked up hundreds of millions of users worldwide in less than six months, bringing AI technology to the masses in a very real and exciting way. As we have seen with many tech trends, their potential is generally only as good as their mainstream adoption. So, score a big one for AI!

ChatGPT’s resounding success prompted Nvidia CEO Jensen Huang to declare this as “the iPhone moment of artificial intelligence” meaning that ChatGPT is the product showing that AI is for everyone (just as the iPhone was the device that ushered in the current mobile era) and it’s also the pivotal moment when we realise what an enormous impact this technology can have moving forward. 

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Big tech bets on AI’s potential 

Nvidia’s CEO was certainly not the only one to take note. In earnings calls across many sectors, AI was a dominant theme — whether it was tech companies offering AI services or businesses eager to use the technology to reduce costs and enhance productivity. Heavyweight investors and big-name money managers have been loading up on AI stocks. Clearly, many in the market see the long-term potential of AI. 

The world’s largest tech companies are also busy getting on board. Just to name a few:

  • Microsoft, which has invested more than $10 billion in ChatGPT creator OpenAI, launched Bing Chat, a chatbot-based version of its search engine, and has been incorporating AI into its suite of applications. 
  • Google parent Alphabet launched its own AI-powered chatbot, Bard. Google Search is getting a major update called “AI snapshots” and AI projects for YouTube and other divisions are also in the works. 
  • Amazon released an updated range of Echo devices and pledged to bring ChatGPT-style artificial intelligence to Alexa-powered gadgets. It is also set to offer a service called “Bedrock,” which will allow customers to build their own generative AI tools. 
  • Meta Platforms has shifted its focus to AI and unveiled a range of new technologies, including a new chip developed in-house to help train AI faster, and a tool designed to help coders build their products. 
  • Apple integrated a slew of AI chat apps in its products, including the iPhone and Apple Watch. CEO Tim Cook stated that he personally uses ChatGPT and is excited about its “unique applications.”

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A piece of the AI pie

How should the average person invest in the potential that AI holds? As usual, it’s important to approach investing in the trend responsibly. 

While AI certainly appears to be more than just a passing craze, with much potential in the long run, many AI stocks have skyrocketed in a short period of time. As a result, valuations are now much higher than they were six months ago. 

Some experts caution against getting caught in a dot-com-like AI “bubble.” As investors, we can be optimistic about AI long-term while still being smart particularly by not forgetting the basics of risk management: diversification and balance. 

A great way to get diversified exposure to the trend is through an AI Smart Portfolio. eToro’s investment experts have done the research, analysis, and allocation to create a portfolio specifically designed for optimal long-term performance and without portfolio management fees. AI-Revolution offers diversified, balanced exposure to leading AI stocks as well as companies benefitting from AI to improve their businesses. 

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