Artificial Intelligence (AI) has become the latest force reshaping global business and investor conversations alike. From generative AI tools like ChatGPT to the vast infrastructure buildouts powering data centers, it’s clear that AI will play a defining role in the next phase of economic growth.
But how should long-term, evidence-driven investors think about this technological wave? Should you overweight AI-related stocks—or will history repeat itself, where innovation changes the world yet leaves many investors behind?
A Technology Wave as Big as the Internet
As Wes Crill, PhD, of Dimensional Fund Advisors, reminds us, it’s easy to look back at the dawn of the internet and imagine that every company benefited. In truth, while the technology transformed nearly every business on earth, the early “pure-play” investors—remember pets.com?—fared far worse than the diversified investor who owned the market.
Crill argues that the same is true for AI today. The potential is vast, but it’s difficult—if not impossible—to predict exactly who will benefit most, or for how long. From chip makers like Nvidia to data-center suppliers such as Vertiv Holdings and Powell Industries, early leaders may not always remain dominant.
The cascade of benefits across industries—logistics, finance, retail, healthcare—suggests that investors don’t need to chase specific AI stocks to participate in this sea change. A globally diversified portfolio already provides exposure to companies that will benefit from these shifts.
What the Research Says About AI and Business Growth
Larry Swedroe, drawing on recent research from The Journal of Financial Economics, notes that firms investing heavily in AI have experienced meaningful growth in sales, employment, and market valuations. AI adoption tends to enhance product innovation—new and improved goods and services—rather than just efficiency or automation.
However, Swedroe also cautions that as AI becomes mainstream, its competitive advantage narrows. Once everyone has access to the same technology, any temporary informational or operational edge disappears. The stock market quickly prices in new information—what Swedroe and Crill both emphasize as the “aggregate intelligence” of the market.
History supports this view. From railroads in the 1800s to the internet boom of the 1990s, major technological revolutions often led to overinvestment and disappointing stock returns among infrastructure builders. The real winners tend to be the users who harness cheaper, more powerful tools once the initial frenzy cools.
The AI Spending Boom and Investor Risks
As of late 2025, the seven largest U.S. technology-driven firms—Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms, and Tesla—collectively make up roughly one-third of the S&P 500’s market value (S&P Dow Jones Indices, 2025). Together, they are projected to invest more than $400 billion this year in AI-related infrastructure such as data centers, GPUs, and cloud systems (Bloomberg Intelligence / Goldman Sachs Global Investment Research).
Recent research from Sparkline Capital’s Kai Wu shows that companies with high capital spending historically underperform those that grow more conservatively. This “asset-growth anomaly” has held true for over 60 years of market data.
Wu warns that AI capital expenditure already exceeds the internet boom’s peak relative to GDP. While AI may revolutionize business, its economic payoff may not justify the record-level spending or valuations we’re seeing today.
As in past cycles, investors should separate their belief in technology from their expectations for investment returns.
As writer Morgan Housel often reminds us, technological revolutions change what we use, not how we behave. The most dangerous phrase in finance is “this time is different.”
AI may redefine industries, but human behavior—our impatience, overconfidence, and hunger for certainty—remains the same. Every boom feels new, yet the pattern repeats: optimism outruns reality, and prediction outpaces humility.
Housel’s work reminds us that the biggest risk isn’t missing out—it’s misunderstanding how little we can truly foresee. The world surprises us again and again, and the right response isn’t to guess better, but to prepare better through broad diversification, discipline, and patience.
Our Perspective: Systematic, Evidence-Driven Investing in an Unknowable Future
At Cogent Strategic Wealth, we believe that durable wealth comes from evidence, not excitement. The principles guiding us remain unchanged, even in the face of new technologies:
- Markets are broadly efficient. Prices quickly reflect collective information—human and machine alike.
- Diversification is essential. AI’s impact will be felt across sectors and geographies, not just in Silicon Valley.
- Valuation matters. Paying less for future earnings remains one of the most reliable predictors of long-term returns.
- Systematic discipline beats speculation. Chasing trends—no matter how exciting—rarely outperforms a structured, rules-based portfolio.
- Humility is key. We don’t know what we don’t know. The future rarely unfolds as even the smartest minds predict.
- Innovation will always find its way into the market. Whether through public equity ownership or global index exposure, investors already own tomorrow’s winners without needing to predict them today.
The Perils of Prediction
It’s tempting to believe we can see what’s coming next—but history humbles us. The experts of the 1990s predicted flying cars before they predicted smartphones. Economists in 2007 couldn’t foresee how deeply a housing downturn would reshape global finance. Even the most sophisticated models can’t consistently outguess markets that process millions of data points every second.
AI itself may amplify that unpredictability. As algorithms learn, markets adapt just as quickly. What seems like a breakthrough advantage one year can become common knowledge the next. In investing—as in life—certainty is usually an illusion.
The Bottom Line
Artificial intelligence will change how we live, work, and invest. But investors don’t need to predict which company, chip, or algorithm will lead the race. The smarter move is to rely on a systematic, evidence-driven approach that already captures the rewards of human and machine progress alike.
At Cogent Strategic Wealth, we help high-achieving professionals align their portfolios with the science of markets—not the headlines.
Because the real edge isn’t in predicting the future—it’s in never needing to.
Disclosures: Cogent Strategic Wealth is a registered investment advisor with the U.S. Securities and Exchange Commission. Registration of an investment advisor does not imply any level of skill or training. This content is for informational purposes only and should not be considered legal, financial, or credit advice. Please consult your own professionals regarding your specific circumstances. All investing involves risk, including the possibility of loss of principal.
Recent Articles
Share:
Passing Wealth Without Wisdom Is the Real Family Risk
Share:
