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Interview with Jim Thorne, Chief Market Strategist at Wellington-Altus
Jim Thorne recently sat down with Quartz for our “Smart Investing” video series to discuss the future of AI and its impact on the market. The conversation, lightly edited for length and clarity, delves into the potential risks and rewards of investing in AI.
AI Bubble: A Looming Concern?
AM: You mentioned that AI could be a bubble. How can investors prepare for this potential event?
JT: I believe we’ll see the bubble burst when earnings estimates become unrealistic by the end of the decade. While expectations continue to rise, we’re not at that point yet. When it happens, it will be crucial to exit investments swiftly. However, I think we’re safe until the end of the decade, but the impact could be more significant than anticipated, leading to societal and regulatory challenges.
AM: So, which stocks would you recommend to retail investors interested in AI?
JT: I suggest focusing on large-cap companies like Nvidia, Apple, Dell, Microsoft, Meta, Lam Research, and Micron. These well-managed multinational corporations are at the forefront of AI adoption and are likely to benefit the most from its growth.
The Importance of Selective Investing
AM: Given the dominance of a few stocks in generating returns, how should investors approach diversification?
JT: Only a small percentage of stocks drive long-term returns, highlighting the importance of selective investing. Warren Buffett’s concentrated portfolio in companies like Apple demonstrates the value of focusing on winners. If diversification seems daunting, investing in broad indexes like the NASDAQ 100 or S&P 500 can be a simpler alternative.
Looking Beyond Tech Giants
AM: Should investors continue betting on big tech names, or are there other sectors worth considering?
JT: While big tech companies remain strong, it’s crucial to explore related industries. Companies like Eaton and Quanta, involved in power consumption, or investments in copper and uranium, essential for technology growth, could offer valuable opportunities beyond traditional tech stocks.
In conclusion, Jim Thorne’s insights shed light on the complex interplay between AI, investment strategies, and market dynamics. As the AI landscape evolves, staying informed and adaptive will be key for investors navigating this rapidly changing sector.
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