AI may be everywhere, but not all companies are turning it into a real advantage.
Imagine this. Two companies have announced that they are using artificial intelligence (AI).
It will be a better business.
The other thing is just providing a better story for investors.
It’s the same technology.
You will get very different results.
That’s why investors should be careful when hearing companies talk about AI.
AI can be a powerful tool.
However, using AI does not automatically improve a company’s business.
As investors, we’ve seen this pattern before.
Every major technology wave creates excitement.
But excitement alone doesn’t make a company a good investment.
The real question isn’t whether companies are using AI.
A better question is: Could AI make this business less competitive?
AI is becoming more accessible
Not so long ago, AI seemed like something only the biggest technology companies could build.
Many AI tools are now widely available.
Businesses can use AI to answer customer questions, analyze data, summarize documents, detect patterns, and improve workflows.
That’s impressive.
But if all companies have access to the same tools, AI alone may not create a lasting competitive advantage.
There is no advantage to owning a hammer if everyone has access to the same hammer.
It starts with knowing what to build with it.
The real edge is context
AI works best when it has context.
Businesses can feed AI with customer records, transaction history, internal processes, and years of business data.
But the best businesses aren’t built solely on data.
They are also built on experience, judgment, human relationships, culture, and accumulated know-how.
Experienced bankers may understand credit risk in ways that go beyond formulas.
A good REIT manager is likely to understand when to buy, sell, renovate, and redevelop assets.
These nuances are not always easy to imitate.
AI becomes even more valuable when combined with businesses that already have strong data, good processes, talented people, and deep customer understanding.
AI does not automatically become a moat
The outer moat is a sustainable competitive advantage.
This allows companies to protect their profits from competitors over time.
Some moats come from strong brands. Others are due to scale, network effects, switching costs, intellectual property, or regulatory advantages.
AI could strengthen these moats.
take microsoft (NASDAQ: MSFT), for example.
AI is useful because Microsoft can build it into products that many companies already use, such as Office, Teams, GitHub, and Azure.
As AI makes these tools more useful, it could strengthen Microsoft’s relationship with its customers and increase switching costs.
alphabet (NASDAQ: GOOGL) provides another example.
The search giant’s advantage doesn’t just come from AI.
This comes from a combination of AI across search, ads, YouTube, Android, and Google Cloud.
If AI improves how Alphabet serves its users and advertisers, it could strengthen an already strong ecosystem.
close to home, DBS Group (SGX: D05) is a useful example from Singapore.
Banks’ use of AI is more meaningful because it sits on top of customer data, risk management systems, banking relationships, and years of digital investments.
In either case, the AI itself is not the moat.
This is a tool that has the potential to enhance existing benefits.
Utilizing AI will not make weak companies stronger.
This is a mistake investors should avoid.
Strong companies may become even stronger if they make good use of AI.
Weak companies that use AI poorly may just end up being weak companies with bright stories.
If a company has poor data, messy systems, weak execution, and no clear strategy, AI may not be able to solve the problem.
This is why investors should be cautious when companies describe themselves as “AI-driven” or “AI-powered.”
These words may sound exciting, but you won’t know if your business is actually improving.
The key question is whether AI can produce tangible benefits.
What investors should ask
Instead of asking:
“Does this company use AI?”
You can ask:
“Will AI actually improve this business?”
Here are five questions to consider.
First, does the company have useful data that competitors cannot easily replicate?
Second, can AI improve customer service for businesses?
Third, can AI reduce costs, improve productivity, and improve profit margins?
Fourth, will AI enhance existing competitive advantages?
Fifth, are executives using AI in a practical and disciplined way, or are they just using it as a marketing phrase?
A successful AI strategy should increase revenue growth, profit margins, cash flow, customer retention, or return on capital over time.
Be smart: AI is already here, but it’s not evenly distributed.
AI has the potential to change the way many companies operate.
But investors shouldn’t be impressed by the word “AI” alone.
The strongest companies may not be the ones most vocal about AI.
They may be quietly using it to do something they’re already doing well, even better.
The next time you see a company talking about AI, stop and ask:
Will this strengthen your business or just make your story sound better?
This one question may help investors avoid a lot of noise.
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Disclosure: Joanna Sng owns shares in all companies mentioned.
