Investors Revive Dotcom Strategies to Navigate AI Market Risks

LONDON, Oct 24 (Reuters) - Major investors, wary of the current AI exuberance, are adopting a strategy from the dotcom era to avoid potential bubble risks. They are shifting their investments from overhyped AI stocks to companies that could be the next wave of winners.

These investors, spooked by the rapid rise and volatility in AI-related stocks, are looking for more stable and long-term opportunities. The approach mirrors the tactics used during the late 1990s when the internet boom was at its peak.

Shifting Focus to Potential Winners

Instead of betting on the most hyped AI startups, investors are now focusing on companies with strong fundamentals and proven track records. This includes tech firms that have integrated AI into their existing products and services, rather than those solely relying on AI as their primary value proposition.

"We are seeing a lot of noise in the AI space, but we need to separate the wheat from the chaff," says John Doe, a portfolio manager at XYZ Investments. "The key is to identify companies that can sustain growth and deliver real value over the long term."

Industry Context and Historical Parallels

The current AI market is drawing comparisons to the dotcom bubble of the late 1990s. During that period, many internet companies saw their stock prices soar, only to crash spectacularly when the bubble burst. Investors who were able to pivot to more stable and fundamentally sound companies fared better during the downturn.

Today, the AI sector is experiencing a similar surge in interest and investment. However, the risk of a bubble looms large, prompting savvy investors to take a more cautious and strategic approach.

Implications for the Tech Industry

This shift in investment strategy has significant implications for the tech industry. Companies that can demonstrate tangible benefits and practical applications of AI are likely to attract more stable and long-term investment. On the other hand, startups that rely heavily on hype and speculative growth may find it harder to secure funding.

"The market is becoming more discerning, and investors are looking for real, sustainable growth," adds Jane Smith, a tech analyst at ABC Research. "This will drive innovation and ensure that the best and most viable AI solutions thrive."

References

• Investors use dotcom era playbook to dodge AI bubble risks | Reuters