Artificial intelligence presents major investment opportunities, but the technology’s rapid evolution also poses risks for early backers, investors said Wednesday at the Greenwich Economic Forum.
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Artificial intelligence presents major investment opportunities, but the technology’s rapid evolution also poses risks for early backers, investors said Wednesday at the Greenwich Economic Forum.
A key concern is the pace of change in the infrastructure that supports AI, such as data centers, which can quickly become outdated, said Rich Nuzum, senior vice president and head of Franklin Templeton Investment Solutions’ outsourced chief investment officer division.
“I'll give you a micro example,” Nuzum said during a panel on global macroeconomic perspectives. “There are data centers that were built two years ago. They're already obsolete because they rely on air cooling as the baseline cooling technology, and the chips have gotten too hot and it doesn't work. The new facility is less than two years old and basically worthless.”
Nuzum was joined on the panel by Anne Walsh, chief investment officer at New York-based Guggenheim Partners Investment Management, and Steve Sosnick, chief strategist at Greenwich-based Interactive Brokers. The discussion was moderated by Sonali Basak, chief investment strategist at New York-based iCapital.
Since its launch in 2018, the Greenwich Economic Forum has become a regular gathering place for investors, economists, business leaders and others to discuss global financial, economic and policy trends.
This year’s conversations also explored how artificial intelligence and digital technologies are reshaping productivity, investment strategies and long-term growth.
Despite the risks, Nuzum said investors may be underestimating the productivity gains that AI and digital innovation will bring, calling them part of a $250 trillion global economic opportunity.
“We’re actually underinvesting collectively,” he said.
Walsh agreed that technological obsolescence is a concern, but said she remains optimistic about AI’s investment potential.
“We're still ahead of and not in a speculative phase just yet,” she said. “You could get there, and then that would shift.”
Sosnick said AI continues to draw investors willing to take early risks for the chance of outsize returns.
Business Insider recently reported that eight major AI-focused companies — including Nvidia, Microsoft and Alphabet — have collectively added about $4.3 trillion in market value so far this year, underscoring the sector’s continued momentum.
“I understand the desire to do that, because the potential advantages to being the first mover are immense,” he said.
Nuzum added that investors should balance AI-related bets with exposure to other sectors to mitigate risk.
“They may never go public, maybe possibly self-financing, and never need to raise capital,” he said. “It’s diversification, but diversification into areas of the market that are really hard to get access to.”