Do you think artificial intelligence is overrated? Dan Niles, founder and portfolio manager of the Satori Fund, agrees. Well, sort of.
The answer to that question really depends on whether you’re talking about the current moment or the long term, Niles said during a session for CNBC’s Financial Advisor Summit.
“NOW [with] every company, you’re on these conference calls and it’s almost like your action is reacting to how many times you say ‘AI’,” Niles said. “
However, that’s usually how it goes with powerful new technology, Niles said.
“You’re in the early stages where the hype is too much because every company is trying to pretend they’re an AI winner,” he said.
But in the long run, just like with the internet, Niles said, AI is “real” and “will change the way we live.”
Investors: “Look at valuations”
Niles predicts that AI is actually “underhyped [in the] long term.”
This means that it can provide many opportunities for investors.
However, just as thousands of companies went bankrupt during the dotcom bubble, many companies touting their use of AI may not profit from the technology or even survive at all.
“Yeah, when everything comes out, everything looks wonderful,” Niles said. “And then you determine who the real winners and the real losers are.”
To avoid getting burned by the hype, investors want to make sure a company using AI has the financial stability to weather an economic downturn, Niles said, and “a good management team.”
“The one thing investors need to remember is to look at valuation,” Niles said. “The valuation gives you a measure of the risk you are taking in buying a business.”
Investors should also consider that AI can help some aspects of a company’s business, while hurting other parts, Niles said, “and so net income…isn’t going to change much. “.
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