The AI market is maturing and ripe for income opportunities, as tech investors are feeling shortchanged on profits. However, specialists often miss the bigger picture in AI investing. History shows that even experts can be wrong in predicting growth trends, leading to missed opportunities for investors. AI firms are competing with each other, but major investors are concerned that the real gains from AI are going to different sectors of the economy.
The introduction of AI tools in businesses leads to increased efficiency and profitability. AI can reduce production times, allowing employees to focus on other tasks or reducing the need for as many employees. Unlike previous tech advancements that taxed every transaction, AI tools are more supportive and cannot command as much revenue from clients. This shift in the tech landscape has implications for investors looking to capitalize on AI growth.
Market research firms like Gartner have highlighted the growing demand for cloud computing even before the emergence of generative AI tools. While AI has sustained this growth trend, it was already in motion in the 2010s and has not changed significantly. Investors in AI stock such as NVIDIA may have concerns about competition and stock price fluctuations, but historical data on price-to-earnings ratios can provide a more nuanced view of stock valuation.
Investors should consider a diversified approach to AI investing by selecting funds that provide exposure to different sectors benefiting from AI adoption. Closed-end funds (CEFs) can offer a balanced portfolio of strong tech stocks and companies across the economy leveraging AI technologies. By investing in these funds, investors can benefit from the efficiency gains realized by numerous firms utilizing AI tools.
One example of a diversified fund for AI gains is the Gabelli Dividend & Income Trust (GDV), which holds top technology stocks like Microsoft and Alphabet, as well as indirect exposure to AI through companies like Honeywell International, Eli Lilly & Co., Mastercard, and American Express. GDV also offers a 6% dividend yield and trades at a discount to its net asset value, providing investors with an opportunity to invest in AI-related companies at a lower cost. By taking advantage of such funds, investors can position themselves to benefit from the growth of AI technologies across various sectors of the economy.