Is AI Technology the new Promised Land?

There’s always so much excitement about new technology that it is tempting as each wave passes, and fortunes are quickly made, to think, next time I see a new breakthrough in technology I’m going to jump in quick and invest early.

But is it the smart way to go?

History says no. That it’s the ‘fast followers” who skip the expensive research and development stage, who learn from the early mistakes of others and so build better cheaper or faster versions of the original technology, who generate the big investment returns.

Consider the following example. Blackberry brought the first smart phone to market. They spent a small fortune on promoting the benefits of mobile email and web access, only for Apple to come in after them and capture the smart phone market.

SixDegrees and MySpace saw the opportunity to provide platforms for social media networking only to be beaten to financial success by Facebook. Xerox Labs created the early ‘mouse’ and GUI technology, only to fade into obscurity as Microsoft captured the home computer market.

I could go on….

While a good idea is central to most businesses, it takes more than a good idea to create a truly great investment grade company, that can stand the test of time in terms of build strong systems, defend its technology and make good money for its investors.

And so, it is with AI technology. There is no doubt this new technology will have a revolutionary impact on how almost every business operates, but where is the smart money going in terms of investing in it.

There are currently three so called AI listed companies on the Australian stock exchange. NextDC, which operates data centres, Brain Chip Holdings, which designs chips for AI applications and Appen, which provide AI supported labelling systems.

Will they go on to dominate the AI industry, maybe. Who knows? No one even knows what the rules will be governing the industry with the Federal Government only recently announcing it is about to create regulations governing how it can be applied in Australia, of course, you can invest in ETFs investing in diversified range of AI related companies but again who know who the winners are?

When Steve Jobs started Apple in his parent’s garage, there were thousands of other almost identical start-ups joining the race to develop and successful market home computing technology.

Investors who came into both companies when they were clearly the winners, didn’t lose by doing so. They just took the risk out of their investing and made sure they were going to be rewarded for their efforts.