The US S&P 500 index has gained 18% this year. Many money managers have been caught out. Their defensive focus on rising inflation and interest rates left them blindsided by big gains in Artificial Intelligence (AI) stocks. There’s no question that long-term investors should be exposed to AI in their portfolios. It is no fad and will drive efficiencies and profitability across diverse industries for years to come in ways we cannot yet imagine.
But should investors buy the types of Big Tech stocks that are capitalising on AI now, but look expensive because they have spearheaded the market’s advance this year? Or should they instead try to identify up-and-coming businesses with a future in the field hitherto overlooked by other investors?
The idea of finding hidden gems is, of course, appealing and there will be many as yet unseen winners from AI. And there is no shortage of ideas about the ways in which it could
