The artificial intelligence (AI) boom is well underway, with many new investors fearful of missing out on what could be a generational trend that kicks off the next technological revolution. Like with any surging trend, there are bound to be massive winners and losers. Companies that shrug off AI innovation could find themselves at a huge economic disadvantage to the firms that effectively leverage its power. We’re not just talking tech firms; we’re talking about everyday companies that can harness AI’s power to realize efficiencies.
The AI boom is real. But that doesn’t mean a bubble can’t form and burst at any moment. Any profound technology can generate a magnitude of hype that paves the way for a nasty selloff or crash. Though some may warn of an AI bubble in formation, I think that AI stocks are hardly a bubble at this point. If anything, there’s still ample value to be had in certain AI stocks that have yet to gain the full appreciation of analysts and investors.
Nvidia stock: Long-term growth and momentum are there, but shares look so frothy!
There may be isolated bubbles that may be forming. Specifically, I think there’s a lot of froth in the AI chip space right now. After the meteoric rise of shares of Nvidia (NASDAQ:NVDA) year to date, it’s hard not to have your “bubble radar” go off.
Nvidia stock has cooled in recent weeks, but it’s still up 187% on the year at the time of writing. Whether this is the beginning of a steeper pullback remains to be seen. Regardless, investors must ask themselves if such a run warrants the type of innovation that Nvidia provides.
Nvidia is an impressive company, and its AI chips are extraordinary. That said, I just do not know if the company can keep impressing investors. Eventually, expectations will be so high that even a remarkable number won’t be enough to stop selling pressure. That’s why chasing stocks that have doubled or tripled up in just a few months can be a very risky proposition.
I have no idea if Nvidia stock is a bubble. It can still justify its $1.02 trillion price tag. But I have no idea how. That’s why I’d much rather look at other, less-appreciated options in the AI space, as they may offer more bang for one’s buck.
How can you future-proof your portfolio with AI stocks without exposing yourself to huge downside risk?
Here in Canada, Shopify (TSX:SHOP) stands out as a potential winner from the AI surge. The company’s recent AI tests could change the game for its customers. Indeed, AI-powered customer service chatbot services are just one place that Shopify could help its merchants thrive in the AI age.
Beyond generative AI and large language models, Shopify also stands to win as it moves into the realm of spatial computing. Imagine a digital storefront where one can try on clothes digitally before buying. Shopify is no stranger to augmented reality.
As it continues testing (and patenting) new technologies, I view Shopify as one of the companies that can gain ground over its less-AI-savvy rivals in small-and-medium-sized-business e-commerce.
