The AI ​​revolution is faster than ever, but investors need to be realistic about its timeline

Investors are once again jumping into the artificial intelligence sector, but those looking for a quick return should think twice.

Nvidia (NVDA) stock hit a record intraday high this week ahead of its 10-for-1 stock split, while new product announcements fueled demand for stocks like AMD (AMD), c3.AI (AI ) and Super Micro (SMCI).

Despite Wall Street’s relentless enthusiasm for new technology, a reality check may be necessary. I spoke with top business executives at Bank of America’s global technology conference earlier this week, who caution against setting unrealistic expectations.

Rajiv Ramaswami, CEO of Nutanix (NTNX), told me that while he is excited about this revolutionary technology, “investments in AI have gotten ahead of reality.”

“There needs to be a valid business case…to justify the cost of investments in AI.” There is a bit of a disconnect between these two at present,” Ramaswami said.

While there are many applications for AI – from generating text and video to forecasting demand for supply chains – many tech companies have yet to see tangible returns on their investments in AI. At the same time, creating AI applications, which require intense computing power, is expensive.

“There are good use cases. I’m not saying there aren’t good use cases. … We just need to make sure that they are economically viable,” Ramaswami added.

Meanwhile, Pure Storage (PSTG) founder John Colgrove said it was important to maintain a realistic timeline for AI’s expected real-life impact. He warns that expectations are “exaggerated” in the short term.

“AI is going to be transformative, but it will take a little longer than people think. What they think will happen in the next 10 years will probably take 25 years,” Colgrove said.

“It’s going to happen, but it’s going to take a little bit longer to build the infrastructure and to actually get effects everywhere.”

In this photo illustration, Google’s Gemini AI is seen on a phone on March 18, 2024, in New York. (Michael M. Santiago/Getty Images) (Michael M. Santiago via Getty Images)

On the startup side, enthusiasm has already waned. After a massive increase for several consecutive quarters, the value of venture capital deals for pre-seed and seed AI startups is starting to decline.

Transaction value totaled $122.9 million in the first quarter, down 76% from the third-quarter 2023 peak, according to the latest PitchBook data.

The determining factors are issues related to profitability.

For investors trying to adapt to the hype surrounding AI, there are still reasons to increase their exposure, even while expecting a “lagged effect,” according to State Street’s Michael Arone.

Arone told Yahoo Finance that investing in companies “laying the foundation for mass adoption” is the best way to play AI. The companies behind data centers, GPUs, software and cloud services provide the tools essential to the AI ​​revolution.

“We really need…

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