Do you think artificial intelligence is being overhyped? 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 haul, said Niles during a session for CNBC’s Financial Advisor Summit.
“Now [with] every company, you get on these conference calls and it’s almost like your stock reacts to how many times you say ‘AI,'” Niles said. “So, yes, you do have a bit of a bubble developing.”
However, this is usually how it goes with a new, powerful technology, Niles said.
“You’re in the early stages where the hype is too much because every company is trying to claim they’re an AI winner,” he said.
But over the long term, much as with the internet, Niles said, AI is “real” and “going to change the way we live.”
Investors: ‘Look at valuations’
Niles predicts that AI is actually “under-hyped [in the] long term.”
That means it may offer many opportunities for investors.
However, just as thousands of companies went bust during the dot-com bubble, many firms touting their use of AI may not profit from the technology or even survive at all.
“Yes, when everything comes out, it all sounds wonderful,” Niles said. “And then you figure out who are the real winners and losers.”
To avoid getting burned by the hype, investors want to make sure a company using AI has the financial stability to withstand an economic slowdown, Niles said, and “a good management team.”
“The one thing investors need to remember is you have to look at valuation,” Niles said. “The valuation gives you a measure of the risk you’re taking on by buying a company.”
Investors should also consider that AI may help certain sides of a firm’s business, while hurting other parts, Niles said, “and so net-net the revenue … isn’t going to change very much.”