As the AI market continues to mature, tech investors are feeling shortchanged on their profits. However, this shift is actually a positive sign as it indicates that the market is ripe for income opportunities for the general public. Despite this, many specialists tend to overlook the bigger picture when it comes to investing in AI. History has shown that even experts can be wrong in predicting growth, as seen in the case of investors who backed Preston Tucker over Henry Ford in the 1930s.
While some AI firms are losing out to others, the major concern for AI investors is that the real gains from AI are going elsewhere. AI tools have the potential to significantly increase profit margins across various industries, not just the tech sector. Unlike previous tech advancements, AI tools are more supportive and cannot command as much of a premium from client revenue. Market research firms like Gartner have noted that the demand for cloud computing was already on the rise before generative AI tools were introduced.
Investors may be concerned about the high valuation of AI stocks like NVIDIA, given the intense competition among chipmakers. However, the efficiencies generated by AI are highly profitable and benefit the larger economy. A diversified approach to AI investing, such as investing in closed-end funds like the Gabelli Dividend & Income Trust, can provide exposure to both strong tech stocks and other industries utilizing AI. This approach allows investors to benefit from the efficiency gains across multiple firms and sectors.
Investors need to consider both direct and indirect exposure to AI when building their investment portfolio. Funds like Gabelli Dividend & Income Trust offer exposure to tech giants like Microsoft and Alphabet, as well as indirect exposure through companies like Honeywell International, Eli Lilly & Co., Mastercard, and American Express. These funds also provide dividend income, with GDV offering a 6% dividend yield and trading at a discount to net asset value. By taking a diversified approach to AI investing, investors can capitalize on the potential growth and efficiency gains across the economy.
