AI Investing: Opportunity or Overexcitement?

Equity markets are once again hitting all-time highs, defying constant headlines about geopolitics, valuations, and slowing economic growth. While that might seem surprising, history shows that markets rise over time because they feed off two powerful forces — innovation and economic progress.

In that context, today’s optimism around artificial intelligence (AI) isn’t entirely misplaced. AI is transforming industries, boosting productivity, and driving new business models. But with so much money pouring in, it’s fair to ask: are investors chasing opportunity — or overexcitement?

Are we in an AI Bubble or a Bull Market?

AI has become the defining investment theme of the moment. Some see it as a generational opportunity; others worry it’s a classic AI market bubble in the making.

Investment in AI infrastructure — from data centres and semiconductors to cloud computing — now accounts for around 40% of U.S. GDP growth this year. That’s a huge figure, and it’s helped power global markets higher.

At the same time, other factors are supporting growth: governments are running fiscal deficits that stimulate demand, oil prices remain well below previous highs, and interest rates are starting to fall. The result? A cocktail of optimism that’s keeping investors confident — perhaps even too confident.

What history tells us

For seasoned investors, today’s AI enthusiasm echoes the dot-com boom of the late 1990s. Back then, the internet promised to change everything — and it did — but not before a painful bubble burst wiped out much of the early hype.

Massive investment in fibre networks and online businesses far outpaced short-term demand. When reality caught up, markets fell sharply. Yet, over the long term, those early investments laid the groundwork for a digital economy that has transformed the world.

AI could follow a similar trajectory. There’s likely to be overinvestment and volatility, but also extraordinary long-term potential. Short-term exuberance doesn’t necessarily mean the long-term story is wrong.

The current reality check

So, how solid are the fundamentals?

AI adoption is growing fast, but profits are still catching up. OpenAI’s ChatGPT, for instance, reportedly has hundreds of millions of users, yet only a fraction pay for premium access. Across the sector, companies are spending heavily on AI model development, training infrastructure, and cloud capacity, while the commercial returns are still uncertain.

That said, today’s leading AI players — such as Microsoft, Nvidia, and Alphabet (Google) — are very different from the speculative internet start-ups of the past. These firms are profitable, diversified, and strategically positioned to capitalise on the long-term AI trend.

Yes, valuations look stretched — but they’re not yet at the extremes that defined the dot-com bubble.

Balancing opportunity and risk

It’s possible to believe both that AI is a transformational force and that parts of the market are running ahead of themselves. True bubbles form when scepticism disappears entirely — when everyone agrees that “this time is different.” That’s not the case today. There’s excitement, but also plenty of caution.

Over time, the winners in AI investing will likely be those that can turn innovation into sustained revenue and productivity gains. For now, investors face a delicate balance between long-term opportunity and short-term volatility.

The sensible next step: speak to an independent financial adviser

AI investing presents a unique mix of promise and risk. Understanding how it fits into your broader investment strategy — and how much exposure is appropriate — isn’t straightforward.

That’s where professional advice comes in. An independent financial adviser (IFA) can:

• Help you assess whether AI investments suit your risk tolerance and time horizon,
• Build diversified portfolios that don’t rely on any one theme, and
• Keep your long-term financial goals on track, even when markets are driven by hype.

So, before jumping into the next big trend, why not take time to discuss your options with us? As professional and respected IFAs, we can provide you with objective, personalised guidance and advice based on your own individual circumstances and objectives.

It could make all the difference between following the crowd and investing with conviction.

Please note 

This article is for general information only and does not constitute financial advice, which should be based on your individual circumstances.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

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