- Lauren Goodwin says investors should keep in mind that the ultimate impact of AI is still unknown.
- She called for a smart approach to investing in AI stocks.
- He said we should invest thematically, focus on quality, and look at adjacent industries on which AI will depend.
The artificial intelligence investment frenzy has played a big role in the S&P 500’s 12% gain so far this year.
Stocks like AI leaders Nvidia and Microsoft alone contributed about 43% of the index’s rise.
LPL Financial
And for good reason. Some expect AI to revolutionize the global economy and boost profit margins. said it could significantly boost global GDP.
But the scale and scope of AI’s ultimate role in society remains unclear, and investors should take a more cautious approach to the technology, especially now that a recession is imminent, says New York Life. Investments economist and portfolio strategist Lauren Goodwin said. Goodwin sees a possible recession later this year as the Federal Reserve rate hikes continue to affect the economy. Therefore, she sees a high probability that the stock market as a whole will fall.
“ In a note on Tuesday, Goodwin said, “The excitement over generative AI is distracting investors from the potential risks of a looming recession. Artificial intelligence is hyped as a game changer, but its real impact. is still unclear,” he said.
Despite this, Goodwin still thinks the universe is worth touching. In her memo, she shared three tips for investing in AI stocks in a smart way.
3 Ways To Invest In AI Stocks Wisely
The first one, Invest in technology thematically Then spread your investment in that area over a large number of stocks.
“The direct winners from AI technology may not yet be known. A diversified or thematic approach is likely to be appropriate to give investors a potentially greater chance of success.” said he. “Given the U.S. value equity base, profitable technology could be a significant value add.”
Exchange-traded funds that offer diversified exposure to AI include the First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT). ROBO Global Artificial Intelligence ETF (THNQ). iShares Robotics & Artificial Intelligence Multi-Sector ETF (IRBO).
Second, she said, Focus on blue chip companies with strong cash flow. That’s especially important now, as recession pressures creep in, she told an insider.
“Investors looking to capitalize on the AI trend should consider the risks inherent in low-quality or cash-flow negative companies at this late stage of the economic cycle, whether large or small, high cash flow and high quality. You should consider companies,” she said in an email.
Finally, Goodwin recommended that Focus on industries where AI relies on scaling up.
“Had we known that the automobile was a disruptive innovation, we might not have known which auto company would be the first winner, but its success included the production of rubber for tires, roads and other supporting infrastructure. You knew you needed it,” Goodwin said.
He added, “We believe the same is true for the proliferation of next-generation disruptive technologies, from 5G deployments to generative AI. Digital infrastructure, communications infrastructure, processing power, data centers and cybersecurity. , the companies that provide the materials to build, each of these building blocks could be important to the economy of the future.”
Investors can gain diversified exposure to the above industries through funds such as the Global X Data Center REIT and the Digital Infrastructure ETF (VPN). WisdomTree Cloud Computing Fund (WCLD). Global X Cybersecurity ETF (BUG).
