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In 2025, it felt like the only stocks to buy were those to do with artificial intelligence (AI). But the issue for those who missed out is whether it’s now too late to join the party.
On the one hand, it seems as though there’s still strong demand for everything to do with the data centre industry. That, however, could all change very quickly.
Momentum
In physics, an object’s momentum is its mass multiplied by its velocity. And while share prices don’t have mass, there’s a very real force that’s been driving AI stocks recently.
The scale of AI investment has been huge from cloud computing firms and even sovereign nations. More importantly, it’s not really showing any signs of slowing down recently.
Semiconductor equipment companies have been seeing continued strong demand and this has been showing up in their share prices. So there might still be some way to go.
Maybe that’s right, but investors need to think about more than what might happen in 2026. Even if the next few moves are higher, this won’t matter if it all comes crashing down.
The lessons of history
A good example of what happens when things go wrong is Cisco Systems. The stock climbed over 150% in 1998 as investors – rightly – anticipated that the internet was going to change everything.
Importantly, in January 1999, it wasn’t too late to buy the stock in one sense – it went up another 200% before March 2000. But when it came down from there, the results were spectacularly bad.
After the share price crashed, it took a long time to recover. While there were ups and downs, the stock was trading at its January 1999 levels in February 2016.
That’s the risk to be wary of with AI stocks. Investors weren’t wrong in thinking that the internet was going to be revolutionary – but that didn’t mean great long-term returns from buying shares.
Being strategic
One strategy I think more investors should pay attention to is the one Apple (NASDAQ:AAPL) is taking. The company is choosing to stay on the sidelines in the AI spending race.
The firm’s decision not to enter what looks like a spending contest has been criticised by a number of investors. But it could be an incredibly smart decision when all’s said and done.
If the huge investments don’t pay off, Apple’s move to watch – rather than participate – will turn out to be a terrific one. And I think this is something that’s well worth taking seriously.
The firm is set to be an AI customer, rather than a supplier. But that might be a good thing – the story of Cisco shows that being involved in the supply chain isn’t always a good thing.
AI investing
I don’t think it’s too late to be looking at AI investments, but jumping into what looks like a spending competition is risky. By contrast, I like the strategy Apple is taking at the moment.
That’s not to say there are no threats – there are constant antitrust regulations that investors can’t afford to ignore. But I think the stock is well worth keeping an eye on right now.
