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Buffett vs Big Tech: AI in your portfolio?

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Artificial Intelligence (AI) stocks should now be part of most investors’ portfolios as Big Tech prepare for an AI boom, suggests the CEO and founder of a leading financial advisory and fintech, as tech titans reported colossal earnings last week.

deVere Group’s Nigel Green urged investors to consider some of the stocks as Microsoft, Google’s parent Alphabet, Facebook, Instagram and Whatsapp parent Meta, and Amazon, drove the earnings week on Wall Street.

On the other hand, legendary investors Warren Buffett and Charlie Munger, the Chairman and CEO, and Vice chairman, respectively, of Berkshire Hathaway, spent hours over the weekend at a shareholders’ meeting in which they expressed scepticism about AI.

“I am personally sceptical of some of the hype that is going into artificial intelligence. I think old-fashioned intelligence works pretty well,” Munger noted.

However, deVere’s Green said that despite Buffett and Munger’s scepticism, Big Tech last week posted robust financial performance reports for first-quarter earnings, indicating the pace of growth has picked up noticeably.

“But the real story was the tech giants’ seemingly relentless mania for AI. Most of corporate America clearly think that this is the future,” said Green.

“The importance of this cannot be overstated, considering that just five tech companies have made up two-thirds of the S&P 500’s gains so far this year.

“Besides guidance, which suggests how companies are positioned to manage an economic downturn, and data on how effective cost-cutting measures have been, the Big Tech earnings season was dominated by AI detail,” he said.

Enormous returns

The tech titans are fully aware of the enormous returns that could be secured when AI starts to radically change the way businesses work and consumers live their lives, Green explained.

“We fully expect that the volume of chat around AI will ramp up in future earnings seasons.”

Green’s belief is backed up by recent events.

The AI chatbot ChatGPT became wildly popular in just a matter of weeks – and took off faster than social media platforms like TikTok or Instagram. Only two months after its launch in late November, it had 100 million monthly active users in January, according to reports.

It is because of the potential way that AI is expected to impact society and global business that Nigel Green said that “AI stocks should have a place in most investors’ portfolios.”

Including AI exposure into an investment portfolio offers several possible benefits, such as “potential strong returns, risk management, diversification, and future-proofing advantages because as the use of AI continues to grow. Those companies that fail to adopt this tech may be at a competitive disadvantage.”

The deVere CEO concluded that, companies with substantial AI interests are likely to benefit from the growth of the industry and this could have potentially significant rewards for early investors.

“Of course, like any investment strategy, including AI in a portfolio carries risks and requires careful consideration. Investors should seek professional advice before making any investment decisions.

“We believe that AI is the future, and we know from the past that early investors in innovative technologies often reap enormous rewards,” Green said.