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“AI has the potential to be more transformative than electricity or fire.” Not my words, but those of Google owner Alphabet CEO Sundar Pichai. Not only may the transformative potential of AI light a fuse under the global economy, but it could present a once-in-a-generation opportunity for investors to get in at the ground floor and set themselves up for a lifetime of passive income.
If the AI revolution sparks the kind of unprecedented economic growth that some are claiming, the shares in firms able to harness this tech might surge in the years to come. Investors might be able to turn small sums into humongous ones with the right exposure to the right companies.
Sounds pretty good, doesn’t it? But is it pretty likely?
Science fiction
When it comes to this brand new technology, one thing is for certain, we’re not in Kansas anymore.
Large language models (LLM) like ChatGPT are the most impressive inventions to emerge since perhaps anything in my lifetime. Perhaps anything ever!
The idea of a computer speaking intelligently was the stuff of left-field science fiction only a few years ago. Now, any Tom, Dick, and Harry’s smartphone can seemingly pass a Turing Test (where a human can’t distinguish if they’re speaking to man or machine).
Incidentally, I tried to give an LLM a ‘sort of’ Turing test and it failed in the first sentence.
Then again, perhaps that little failure wasn’t so incidental. Perhaps this superficially impressive technology is more smoke and mirrors than revolutionary breakthrough?
One recent MIT study supports this, finding that 95% of attempts by companies to use AI didn’t return a profit. My takeaway from that statistic is that if AI is to light a fuse under the global economy, it hasn’t happened yet.
Income chances
While the true impact of AI is yet to be uncovered, I’m making sure I have a little exposure through tech-based stocks like investment fund Scottish Mortgage (LSE: SMT). For the uninitiated, Scottish Mortgage is a FTSE 100 fund that aims to find the next hot properties in tech. Past winners include Tesla and Nvidia and its current holdings are a laundry list of exciting new companies with a lot of potential.
Is this a pure AI play? No. Those looking to invest directly in artificial intelligence may look at Nvidia or TSMC, though some of the most interesting AI startups are still in the realms of venture capital rather than listed on stock exchanges.
What interests me about Scottish Mortgage is that tech-based firms like Bytedance or Mercadolibre are likely to tap into some of the possible benefits of AI. And if the hype is a little overblown? No problem. These firms stand up in their own right. While there are risks to any stock, and one of the big ones here is a large proportion of unlisted stocks that can’t be priced accurately, I think it’s one to consider.
Will its AI involvement lead to oodles of passive income sometime in the future? I’m crossing my fingers.
