People Seem to Think AI Is the Best Investing Opportunity of Our Lifetime. How True Is That?

 Many sectors, including other cutting-edge technology, are impacted by AI.

Earlier this year, artificial intelligence (AI) boosted numerous tech companies. After the largest tech sell-off since the financial crisis in 2022, OpenAI's ChatGPT helped rekindle interest in AI equities.
However, firms like Google parent Alphabet asserted in 2016 that they were a "AI first" corporation. Additionally, Apple has long supported AI and machine learning research, and many others have benefited from the technology for many years.

You could be wondering whether AI is one of the best investment opportunities of our lifetime or if it will fall short of other key historical chances to drive profits because it has long been an unnoticed trend.

The impact of cutting-edge technologies

You might be able to see how AI could become one of the best investing possibilities yet, if not the greatest, notwithstanding AI-driven advances in previous years. The largest tech companies of today were mostly spawned on the internet over the previous 25 years.

And history demonstrates how innovation can generate enormous value. The introduction of Apple's iPhone enhanced internet usage. Apple had a $105 billion market worth at the time of that introduction. Since the iPhone accounts for little over half of the company's revenues today, its market cap is about $2.9 trillion, which translates to roughly $1.5 trillion in income generated by smartphones alone, excluding other businesses based on this technology.

Admittedly, innovation is not limited to AI. Ark of Cathie Wood

Creating value in AI

Wood has also hinted that Grand View's AI projection might be overly pessimistic. Due to AI, Ark Invest has made Tesla (TSLA -5.06%) its largest stake. Tesla is developing EV and battery technology, has almost reached a $800 billion market valuation, and has created its own AI technology to drive robotaxis.

Tesla will reach $2,000 per share by 2027, according to Wood and her colleagues, due to the potential of the robotaxi platform. At the time of writing, the price of the AI stock is around $250. In that case, Tesla's market valuation would surpass $6 trillion, more than doubling that of Apple at the moment. Within one corporation, AI would create over $5 trillion in revenue.

And that excludes Wood's investments in AI stocks like Nvidia (NVDA -1.71%), the industry leader in GPUs with AI capabilities. That suggests that Tesla might not be the first business to generate trillions of dollars in market value through AI over time.

How AI could fall short of expectations

But despite its enormous potential, AI can disappoint investors. One of its key technologies, the robotaxi, is rife with potential problems since technical flaws could have life-or-death consequences. Investors' faith in the technology might decline if they learn that a robotaxi failed to detect a person or a roadblock.

The investing thesis of Ark Invest for Tesla does not seem to take into account such a scenario. This might undercut the Ark Invest thesis on Tesla and its other AI stocks, which would mean that trillions of dollars in projected shareholder value might never happen.

Accuracy checks for AI are also necessary. Previous iterations of ChatGPT did not include any data gathered after 2021, which frequently led to data that was either missing or erroneous. Even though the most recent version largely fixed this problem, it remains possible that these apps are not taking into account all the data sources when conducting information searches or attempting to draw conclusions.

A crucial aspect of machine learning (ML), a subset of AI, is its capacity to learn from errors. However, even as it gets smarter, it won't be able to match human ingenuity, which poses a barrier to AI's ultimate potential.

Making sense of AI's future

Given its potential, AI appears to be destined to rank among the most important investment options available to investors.

It's true that the internet and smartphones were also revolutionary, and future innovations (even ones that haven't yet been invented) will likely produce significant shareholder value. Furthermore, data access could have a negative impact on the precision and worth of AI's judgments, and AI could still make catastrophic errors. The need for human capital will probably alter rather than be replaced by those difficulties and the requirement for inventiveness.

But the fact that so many more recent and older technologies rely on AI might make it a crucial application. This suggests that every growth investor need to have stock in an AI-driven entrepreneur.