Our team has received many inquiries about a change in our world – Artificial Intelligence. What are the implications of AI? How does it impact the investment process? Will the world change and leave our portfolio behind? These are all very valid and legitimate questions. The Ross Group believes AI is a transformative technology that can potentially make our world more productive and efficient. We think the AI movement is comparable to the Internet revolution of the 1990’s, and there are lessons from that time that can help investors navigate moving forward. These include the following:
1. The investment “winners” of AI are unknown. Remember AOL? That business was the lead horse of the internet revolution. It was one of the largest companies in the world, valued in 1999 at over $200 billion.1 26 years later, AOL was sold for just $1.5 billion. 2 This example suggests investors must be careful about picking companies and making assumptions about their future - just because an idea of the future is correct does not mean an investment in that arena will automatically lead to profitability.
2. The future takes time. Everyone believes the future will be here tomorrow, but it never works out that way. It takes time for the masses to adopt new technologies; it will not be an overnight change. We saw that concept play out during the internet revolution – the integration and development took longer than many initially expected.
3. There may be up-and-down cycles within a longer-term upward trend. The internet revolution certainly had a wild ride. There were massive swings in stock performance and related investments. Remember the popping of the Dot-com bubble? There are often natural limits to growth in the short-term. We must be careful not to be caught in a cycle of overinvestment without a known profitability.
4. AI should benefit most companies and industries. Our team believes this is the most important lesson from the internet revolution. The internet improved most of the businesses it touched, regardless of direct or indirect exposure. We believe that companies can become more efficient and productive due to the impact of AI. These improvements may free up capital to invest in research & development, reduce debt, or potentially to pay more dividends. AI, like the internet revolution, does not have to be a zero-sum game; it can help businesses succeed.
Our team believes these lessons are important for investors to understand as we move forward into the Artificial Intelligence age. They can aid us in our navigation of new and different times.