When a new industry is on the brink of a breakthrough, media hype inevitably follows. This hype can generate interest, particularly during the early stages of an emerging technology, and drive up prices. However, there is a significant mistake that should be avoided when dealing with new technologies: attempting to pick individual winners.
Historical Lessons: Airlines
During the initial boom of the aviation industry, it was hailed as the “dawn of a new age of transport,” and indeed, it was. However, not all airline companies achieved success. Some thrived, while others failed. Selecting the “winning” airline company from the multitude would have been a daunting task.
Historical Lessons: Dot Com Bubble
In the late 1990s, the market was captivated by the internet’s potential. Numerous companies emerged with innovative ideas and promises. The internet did revolutionize the world, as promised, but not all companies survived. When the dot com bubble burst, many companies collapsed.
Approaching AI Investments
AI is a groundbreaking technology poised to reshape our world. However, along the way, seemingly promising companies may fade as new technologies emerge, rendering previously profitable businesses unviable. Therefore, be cautious about attempting to identify winners. One possible approach is to focus on established, profitable large companies that are incorporating AI into their operations. Diversifying your investments across a range of companies involved in AI is worth considering. Remember, all bubbles eventually burst, even those that eventually deliver on their promise of a transformative world.
