Is AI A Hype? 🤔
Amidst the widespread AI hype, numerous stocks have experienced a remarkable surge, with some even recording gains of over 100% in the past year. While certain established entities such as $Microsoft(MSFT.US$ offer investors stability in earnings, a significant portion of AI-focused companies are still in their nascent stages, and their business models remain unproven.
In “The Intelligent Investor," Benjamin Graham astutely pointed out that the primary hazard confronting the average securities buyer is not overpaying for high-quality stocks, but rather incurring losses by investing in low-quality securities during favorable economic conditions.
“Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions. The purchasers view the current good earnings as equivalent to ‘earning power’ and assume that prosperity is synonymous with safety.”
As enticing as the AI-driven profits may seem, we should exercise caution before jumping onto the AI bandwagon. The euphoria surrounding AI investments can expose unwary investors to serious risks, particularly if they acquire assets at inflated prices. Just look at how $C3.ai(AI.US$ stock can fall 10% in one day. 🔻📉
In the words of Howard Mark: "Rule number 1: Most things will prove to be cyclical. Rule number 2: Some of the greatest opportunities for gain and loss come when other people forget rule number 1." Give me a 👍 if you find this useful!
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