Aswath Damodaran, often called the Dean of Valuation, said investors must choose one of four strategies to invest in a market dominated by the artificial intelligence (AI) theme, between betting on AI's success, following market consensus, staying sceptical or positioning for a crash.
Artificial intelligence (AI) has become a giant bet for financial markets, with companies committing billions of dollars to capital expenditure and investors pricing in expectations of future growth. If AI delivers on its promise, investors could reap substantial rewards. If it fails, companies could face massive write-offs and stock prices could take a hit.
Ashwath Damodaran, professor of finance at New York University's Stern School of Business, says investors cannot afford to sit out this debate. In his analysis of AI as a business, he outlines four strategies to navigate the uncertainty.
The first option is to bet that AI will fundamentally transform how people live and work, creating valuable businesses in the process. Investors following this strategy could buy companies developing AI technology and avoid or short businesses vulnerable to disruption.
However, questions remain over the pace of adoption and whether the economic benefits will justify the enormous investments being made.