What Investors Should Know About AI

There is perhaps no hotter topic than Artificial Intelligence (AI) and its potential for reshaping our world. ChatGPT, the most well known AI interface, got to 1 million users in 5 days. It took Instagram 2.5 months and Netflix 3.5 years. That is an incredible speed of adoption! As you consider how AI may impact your investment strategies, here are some key points to keep in mind:

Understand the Basics

AI encompasses a broad range of technologies, including machine learning, natural language processing, and robotics. ChatGPT is an LLM (Large Language Model). LLMs are trained on massive data sets. But the training is only as good as the quality of data it is fed.

An article in the Journal of Financial Planning found that LLM responses sounded authoritative, but they were often wrong or lacked the critical thinking you might get from a live person. Grasp the basics and stay informed about how these technologies work and are applied. Try not to take an answer as “gospel” without some additional research.

Know the Scope

AI is not confined to tech. Industries such as healthcare, finance, manufacturing, and retail are leveraging AI for improved efficiency and innovation. Evaluating AI’s impact on specific industries and sectors can help inform investment decisions.

Ethical Considerations

AI development raises ethical concerns, including privacy, job displacement, and bias. Companies that prioritize ethical AI practices may attract more long-term support from consumers and investors alike.

Regulatory Landscape

AI is under increasing scrutiny from regulators. Keep an eye on government policies and regulations that could impact AI companies and their operational environments. This could affect stock performance and investment viability.

For example, facial recognition startup Clearview AI recently settled a lawsuit about infringing

Consider Market Volatility

The rapid evolution of AI may lead to sudden market shifts. As more information can be captured and processed, the rate and magnitude of change can increase. Be prepared for volatility and remember to maintain a long-term perspective.

Innovation Timeline

Understanding that AI technology is still maturing is crucial. Companies showcasing current AI capabilities may not guarantee future success. To put this in perspective Moore's Law states that the number of transistors on a microchip doubles every two years. However, some say that AI programs can train themselves by doubling every four months, which means that over ten years, AI training may grow by more than 100,000,000 times faster than Moore's Law.

Investors should continuously educate themselves about AI advancements. Staying informed about technological trends and breakthroughs can offer a competitive edge in decision-making.

Embracing the potential of AI requires diligence and a balanced understanding of its implications. By keeping these considerations in mind, investors can strategically position themselves in a rapidly evolving landscape.