I recently looked at the “60 Minutes” segment to explore the possibilities that artificial intelligence could have an impact on education.
In this work, Sal Khan, founder of Khan Academy, discusses Khanmigo, an AI-powered private tutor developed to enhance education. Khanmigo provides personalized tutoring to students, helping teachers with tasks such as lesson planning and grading.
A former English teacher spoke about how she previously taught 100 students. When she needed to review the first draft of the essay, she only spent about 10 minutes per student. However, the limited time per essay meant that I had spent about 16 hours just checking the first draft. AI-driven tools like Khanmigo have already demonstrated their ability to review papers in seconds and provide thoughtful feedback. The potential efficiency of teachers is game change.
When I read, listen to, and watch works like this about the impact of AI, I can't help but think about how best to invest in it. It is becoming clear that AI can make a major difference in the world of work, but it is difficult to know which companies will become the biggest beneficiaries.
In my lifetime, there have been some similar technological advances that fundamentally changed the way we work, such as computers, the internet, and mobile phones. Each of these new technologies has led to enormous amounts of growth for businesses that have used them. However, it is clear that with perfect hindsight, it is extremely difficult to choose the right company to capture these trends.
In the late 1990s, Global Crossing was widely regarded as the premier investment opportunity to build and operate a global fiber optic telecommunications network built to provide large-capacity internet and data services around the world. By 1999, Global Crossing stocks had skyrocketed, valued at $47 billion.
The global intersection then collapsed spectacularly. Dotcom's bubble burst, bandwidth demand, and global intersections have not been able to generate enough revenue to cover its large costs. By January 2002, the company filed for bankruptcy.
Meanwhile, Amazon was an emerging online retailer dedicated to books. Many investors in the 1990s thought Amazon was overvalued. Amazon didn't make any profits until the fourth quarter of 2001.
In the late 1990s, many investors would have opted for a global intersection beyond Amazon. Furthermore, even if you bought Amazon stocks in January 1999, by the second half of 2001, your $1,000 investment had collapsed to just $113. It was impossible to predict that the same $1,000 investment would ultimately be worth more than $78,000.
Mobile phones are another great example. In 1999, if you're an investor with an interest in mobile phone technology, you may have found your way to Nokia or Motorola, two of the world's biggest companies. It was clear that these companies were looking to make great profits from the rapid growth of mobile phones. If you changed the page to the early 21st century, you could have jumped on the BlackBerry Bandwagon. One of these investment ideas definitely looked good back then.
However, the company that ultimately utilized mobile phones did not develop its first model until 2007. This is almost ten years after the epidemic began. If you bought an Apple Computer in the late 1990s, you didn't know that the iPhone would be a driving force behind pushing Apple into one of the world's biggest companies. In 1999, Apple showed revenues of just over $6 billion. By 2024, its revenue was $391 billion.
These stories aim to point out that even if you know that new technologies are likely to impact the world, it can be extremely difficult to identify which companies you are investing in. In early June, Nvidia once again took over as the world's largest company. As the biggest chipmaker in AI-related technology, it is clear that Nvidia continues to be the beneficiary of this trend. That may or may not be true. As investors that will take over the next decade, there may be startups that are not even registered on our radar. AI is evolving rapidly, but also faces unpredictable regulatory, ethical and competitive risks.
What should we do as an investor to take advantage of this trend? If you want to find the next Amazon, Apple, or Nvidia, it will be very difficult. You might argue that you really need to choose the right stock for good luck. I'm studying the market religiously, but I couldn't guess who the next big winner would be.
The only way to ensure that you capture the next big winner is to own a widely diversified portfolio of stocks, ideally the entire market. The Apple IPO was part of the S&P 500 in 1980 and by 1982. A simple investment in the S&P 500 index fund would have provided exposure to its early Apple. Certainly, it was a very small slice of the overall investment, but it gave you a great deal of time-paying Apple ownership. The $1,000 investment in the 1982 S&P 500 is worth more than $48,000 today, with dividends reinvested, thanks to its small Apple.
Are you trying to pick an individual strain and target the next apple? You can give it a try and maybe you'll hit the lottery. I admit, I'll try it for a little money too. Your investment style will be inherent to your personality and tolerance for risk.
But the easy way to capture all the opportunities is to own a little bit of everything. Even if you don't win the lottery, wide diversification has consistently proven to be one of the most effective ways to build wealth over time.
