The relentless discussion about AI and tech can blind investors to striking rallies in other sectors
Cris Sholto Heaton Investment columnist
The most striking feature of today’s markets is the near-total lack of interest in anything that is not artificial intelligence (AI). Tech investor Mary Meeker makes this point during her interview with Barron’s (see right), noting that she is also investing in various non-AI tech opportunities as well. Yet the vast majority of her comments still involve AI and machine learning (ML).
If AI turns out to be as revolutionary as some claim, this single-mindedness may be justified. We can imagine scenarios in which it completely up-ends the world – for better or worse. Investors should be open to this. Still, some caution is wise. Certainly the volume of money flooding into the sector is not a reliable indicator of its merits.
After all, the last decade was a very good time for start-ups seeking funding. The exact numbers vary depending on the source you use, but global venture capital (VC) investment rose from roughly $50bn a year in the early 2010s to $250-$300bn more recently, with a brief spike to an annual rate of about $600bn in 2021 and early 2022.
Some of this went into useful products, but much went into apps and services that relied on a steady flow of VC money to underwrite losses while they tried to seize market share in the hope that their nonsense business models might one day turn a profit. The poor performance of so many stocks that went public in the bubble associated with special purpose acquisition companies (Spacs) shows how this turned out. An index of companies that listed via mergers with a Spac would have lost 45% in 2021 and almost 75% in 2022, according to Russell Investments.
So while AI dominates the headlines, it’s useful to keep an eye on what’s going on elsewhere. Checking out the top-performing exchangetraded funds (ETFs) is one way
