Q+A: Where to invest if the AI boom comes unstuck
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What is the anti‑AI portfolio and why was it created?
Welcome to Fear and Greed QA, where we ask and answer questions about business investing, economics, politics, and more. I'm Sean Aylmer. Artificial intelligence has become one of the defining investment stories of this market cycle. But what happens to your portfolio if the AI boom comes unstuck? Remember, this is general information only. You should always seek advice tailored to your circumstances before making investment decisions. Gorav Sodi is Deputy Head of Research at Intelligent Investor. Gorav, welcome back to Fear and Greed QA. Hi, Sean. Great to be with you. Intelligent Investor has put together an anti-AI portfolio, looking at companies whose investment cases don't depend on the AI boom. What worries you about AI as an investment theme, or is it just a diversification plan?
Sean, there are two reasons we put this together. The first is that we are naturally a bunch of contrarians and I'm a firm believer in investing in a way that is authentic with your weird personality. So whatever strange trait you exhibit, lean into that strange trait. Be a widow in investing because it's the one area in life that allows you to beat the oddball and succeed because of that. everywhere else demands you fit into a very neat little cookie cutter approach. Investing is wonderful because you can be the contrarian and the oddball and benefit from it. So we are naturally contrarian. So in everyone is talking about one part of the argument and everyone is optimistic and I would say almost euphoric about AI.
It pays to just at least examine the contrarian case and I think we've done that with these stocks. The second reason is also because what AI has done is really cut the cost of intelligence to zero. And we haven't really seen this before in human history and it will have profound implications. We don't know what those implications will be. There's a natural tendency for people to be optimistic and to expect the future to be better, but I think it it's a good idea to have at least part of your portfolio grounded in the physical world. where real objects and real goods and services move around. And that's just a form of sensible diversification. Even if you're not a weirdo like we are, it's just a sensible thing to do to have part of your portfolio in the real world.
Okay. You you mentioned some of those previous booms, but when you think about railways and electricity and the internet, the really big ones over, you know, the last few hundred years, what does history tell us about the point we're at now in the AI journey?
Booms are almost always grounded in reality and they almost always end in euphoria. So there's always an element of truth that gets a boom, its initial oxygen, and gets going. It's the nature of investing that those nuggets of truth and that initial optimism fuel a euphoric boom and a bus cycle. And that's very necessary because you need people to be optimistic and euphoric to fun. fund all the capital that is going into AI just as you needed those traits to fund railways, to fund electricity. And if you remember in the nineties, Sean, I don't want to take liberties with your age, but if you remember in the nineties, we needed the euphoria and the boom to fund fiber optic cables. And the AI boom is built directly on the back of the craziness of the nineties that allowed fiber optic cables to crisscross the globe.
And without that euphoria, you just do not get the capital and the the physical spend that you need. So it it plays a Very important function in the real world.
Okay, so let's get into the anti AI portfolio. Broadly, what makes a company a good place to be if the AI trade suddenly reverses? Is it about avoiding AI or businesses that don't depend on the hype? What is it?
Well, if we start with the premise that AI fundamentally reduces the cost of intelligence to zero. it makes anything in the digital world seamless, frictionless, and inherently more competitive, then we turn our attention then to businesses in in the physical world. And that doesn't mean blindly buying any physical business.
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