Artificial intelligence is currently shaping many economic and technological developments. Consequently, there is strong investor interest in companies associated with AI.
Whether investors should invest in AI stocks cannot be answered in general terms. This also applies to the question of what exactly constitutes an AI stock. After all, it's not just the obvious companies in the AI value chain that benefit from technological developments, such as software providers or chip manufacturers, but also those that use artificial intelligence to optimize their workflows and processes. Therefore, a differentiated analysis of business models and the opportunities and risks associated with AI is crucial.
The boom surrounding artificial intelligence
Mit ChatGPT begann Ende 2022 der Boom rund um die Künstliche Intelligenz. Seitdem profitieren Anbieter von KI-Anwendungen und Unternehmen, die im weitesten Sinne an der Wertschöpfungskette von KI beteiligt sind, von erheblichen Kurszuwächsen. Denn es sind nicht nur Chips, die für die Entwicklung und den Betrieb KI-basierter Anwendungen benötigt werden, sondern auch umfangreiche Investitionen in Rechenzentren, Serverkapazitäten, Energieversorgung sowie die zugrunde liegende Software- und Dateninfrastruktur.
How and where are investments worthwhile – and what should investors consider?
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The principles of investment remain crucial
For most investors, the primary goal when investing is to preserve the value of their assets. This stems from the desire to offset the loss of purchasing power due to inflation – and ideally, to generate sufficient returns over the long term. This can be achieved by investing in companies with sound business models.
Valuing AI stocks is challenging.
Analysts, when analyzing companies, focus particularly on management, the balance sheet, and the competitive position. The resilience and robustness of the business model, which ideally result from these factors, are essential for assessing opportunities and risks. Assessing growth prospects becomes difficult when companies are heavily dependent on economic cycles, regulatory frameworks, or technological change – or when expectations are significantly influenced by current trends.
Because above all, expected earnings are crucial when valuing companies. Reliably assessing these in a dynamic and rapidly developing sector like artificial intelligence involves considerable uncertainty. A company's share price reflects not only its current earnings situation, but above all, the market's expectations for future business development. The higher the expected growth rates,The more these expectations are reflected in the price – even if corresponding profits are only to be expected in the future.
AI stocks are therefore sometimes valued at several times their current earnings. Whether these expectations can be met by sustainable returns depends, among other things, on whether the high investments in infrastructure, computing power, and development will meet with sufficient long-term demand.
Many industries will benefit from AI.
One thing is certain: Artificial intelligence will not only benefit the companies initially associated with AI and, more broadly, the tech industry. In the long term, a multitude of industries and companies will use artificial intelligence to optimize their business models.
The Flossbach von Storch Research Institute points out that the economic benefits of AI arise less from individual applications and more from its widespread integration into existing business processes. In a recent commentary, the institute states that what matters most is "how quickly companies actually implement and productively utilize AI in their operational processes – not how spectacular the technology itself is."
Accordingly, productivity gains can arise in various sectors, including industry, healthcare, retail, and financial services, for example through automated processes, improved data analysis, or more efficient decision support. It is crucial that companies do not resist technological advancements. This is one of many aspects that analysts and portfolio managers evaluate as part of their fundamental analysis and incorporate into their quality assessments.
Long-term perspective instead of short-term trends
Therefore, in the long run, it is less crucial to follow short-term market movements or individual technology trends. Historical experience shows that phases of sharply rising valuations do not necessarily last. What is crucial is investing in companies that have robust business models, manage their investments prudently, and can maintain their competitiveness even under changing market conditions.
How is the analysis conducted from an investor's perspective?
The investment team at Flossbach von Storch consists of more than 30 portfolio managers and analysts. Crucially for us, we don't limit ourselves to point forecasts of future earnings development, but rather consider different scenarios.
Before we invest in a company, it undergoes our in-house analysis processes. Based on the results, we calculate the fair value of an investment and the associated return potential. Because good quality has its price – but not every price.
Frequently Asked Questions about AI Stocks
Many AI stocks reflect high expectations for future growth. Whether these expectations are justified depends on whether companies generate sustainable profits and whether investments are covered by long-term demand.
Zu den Risiken zählen hohe Bewertungen, technologische Unsicherheiten, regulatorische Eingriffe und die Frage, ob sich die hohen Infrastrukturinvestitionen wirtschaftlich auszahlen.
Nein. Langfristig können auch Industrie-, Gesundheits-, Handels- und Dienstleistungsunternehmen von KI profitieren, sofern sie die Technologie sinnvoll in ihre Geschäftsmodelle integrieren.
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