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Today’s top AI companies may not be the best long-term investments, the consultant says

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Do you want to invest in artificial intelligence? Today’s “niche” companies and those considered AI leaders are unlikely to be the biggest winners for long-term investors, said Barry Glassman, a board-certified financial planner and a member of the CNBC Advisor Council.

“I’ve been through this enough to realize that the niche players who are at the beginning may not necessarily be the long-term players,” Glassman said.

AI is designed to mimic a human’s cognitive abilities—that is, to think like a human. It enables computers and machines to carry out tasks independently.

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The technology is not new. However, its notoriety grew after the San Francisco-based company first introduced OpenAI ChatGPT to the public in November. The AI ​​chatbot quickly went viral. Users used the program to write essays, song lyrics, and computer code, among other things.

Glassman believes the technology will be just as transformative — and disruptive — as the internet.

“AI has the potential to transform every company and the way we operate in the world,” said Glassman, who is also the founder and president of Glassman Wealth Services, based in Vienna, Virginia and North Bethesda, Maryland .

Some of the big, early Internet-related investments, like AOL and Cisco, were “phenomenal” for investors in their early years but weren’t major players in the next decade or two, Glassman said.

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A similar pattern emerged in the pandemic era, when companies like Zoom and DocuSign initially saw their shares rise but later plummeted due to an increase in online work-from-home activity, Glassman said.

The same will likely apply to AI, he said.

There aren’t many niche public investment companies right now — they appear to be mostly private and will become more prominent in the coming year, Glassman said.

Dan Romanoff, senior equities analyst at Morningstar Research Services, echoed this sentiment: saying Investors are unlikely to find a good “pure” AI company to invest in today.

I would ask the question: What company these days is not an AI company? And if not, just wait 12 months.

Barry Glassman

President of Glassman Wealth Services

Instead, investors who want to get involved in the “AI issue” would likely buy a “really strong company with a broad moat” like Alphabet, Amazon or Microsoft, for which AI is one of many businesses, Romanoff said.

Nvidia, a semiconductor manufacturer, did it too benefits out of AI enthusiasm, he said. The stock is up more than 200% this year best performance member of S&P 500 stock index during this period.

However, it is unclear whether such companies will continue to be among the frontrunners in AI even as the technology advances, experts said.

The biggest beneficiaries may not even be technology companies, but those who use and benefit from AI products and services, Glassman said.

“The tertiary companies that aren’t directly involved in developing flashy AI applications could see a bigger boost than a company like Microsoft that provides the AI ​​engine,” he said.

Think of biotech, pharmaceutical and logistics management companies that can use AI to drive innovation in ways previously unthinkable, without billions of dollars in costs and associated risks, he added.

“I would ask the question: what company isn’t an AI company these days?” Glassman said. “And if they aren’t today, just wait 12 months.”

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