Savvy investors look for proven companies to capitalize on AI's potential

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Investing.com - As artificial intelligence (AI) continues to make strides in the tech industry, experienced investors are searching for undervalued opportunities in this highly-valued sector. The recent release of Microsoft-backed OpenAI's ChatGPT bot has sparked a surge in shares of companies like Nvidia and C3.AI, but many seasoned investors are taking a more cautious approach.

Generative AI technology, which learns from analyzing vast datasets to generate text, images, and computer code, is attracting significant interest from businesses aiming to streamline processes such as video editing and recruitment. Consultancy firm PwC predicts that by 2030, AI-related productivity savings and investments will contribute $15.7 trillion worth of global economic output – nearly equivalent to China's GDP.

The challenge for investors lies in determining whether it is prudent to invest now or wait due to potential regulatory concerns surrounding the disruptive nature of AI technology. Niall O'Sullivan, chief investment officer at Neuberger Berman, acknowledges there will be winners but cautions against assuming success across the entire market.

Instead of pouring money into hot start-ups or overvalued businesses that may ultimately fail, savvy investors are focusing on established technology companies poised to benefit from long-term trends related to AI adoption. Alison Porter at Janus Henderson advocates investing in major tech firms with strong balance sheets like Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) because they have demonstrated their commitment towards advancing AI technologies while maintaining financial stability.

Investors looking beyond inflated valuations should consider backing proven companies involved with infrastructure development necessary for future generative AI applications. Mark Hawtin at GAM Investments emphasizes finding exposure without picking highly valued options.

Companies providing essential tools for enabling new AI technologies also garner attention among seasoned investors who recognize that just a fraction of global data is currently being captured, stored, and used. Firms like Seagate Technology (NASDAQ:STX), which specializes in data storage products, and chipmaker Marvell Technology are examples of companies that fit this criteria.

As businesses explore AI adoption strategies, experts like management consultancy Accenture (NYSE:ACN) also stand to benefit from guiding organizations through the process. However, some investors remain cautious about AI-themed stocks due to memories of past tech crashes such as the dotcom bubble in the early 2000s.

While many investors are eager to capitalize on AI's potential immediately, Janus' Porter reminds them that significant benefits will likely materialize over time rather than instantaneously. She emphasizes that it is crucial not to blindly invest in AI at any cost but instead seek out well-positioned opportunities within established companies for long-term success.