From killer robots to billion-dollar investments, artificial intelligence is generating extraordinary excitement and equally extraordinary fear. But is AI really the greatest technological revolution of our lifetime, or are we witnessing one of the biggest investment bubbles in history?
Imagine waking up one morning to discover that artificial intelligence has taken your job, manages your investments, diagnoses your illnesses, writes your emails and even decides what you should have for dinner.
For some people, that sounds like paradise. For others, it sounds like the beginning of the end of humanity.
And then there is a third group who believe the whole thing is an elaborate scam, designed to persuade investors to pour billions into technology companies promising a future that may never arrive.
So, who is right?
As someone who has spent decades working in financial planning and investment management, I have seen plenty of technological revolutions, investment bubbles and supposedly world-changing innovations.
The internet was going to change everything. It did.
The dot-com boom was going to make everyone rich. It didn’t.
Bitcoin was going to replace traditional money. That hasn’t happened, although it has certainly created and destroyed fortunes along the way.
Now artificial intelligence is being presented as the next great transformation.
But this time, could the consequences be much bigger?
The Terminator Scenario: Could AI Destroy Humanity?
Let’s start with the frightening stuff.
For decades, Hollywood has entertained us with stories about machines becoming more intelligent than humans and deciding that we are no longer necessary.
Think The Terminator, The Matrix or 2001: A Space Odyssey.
Until recently, these scenarios belonged firmly in the world of science fiction.
Today, however, some of the world’s leading AI researchers are seriously discussing the possibility that increasingly powerful artificial intelligence could eventually become difficult, or even impossible, for humans to control.
The concern is not necessarily that robots will suddenly develop hatred towards humanity.
It is something potentially more complicated.
Imagine giving a highly intelligent AI system an objective, but failing to specify the limits within which it must operate.
The system might pursue that objective in ways that are technically successful but disastrous for humans.
For example, suppose we instructed an advanced AI to eliminate climate change.
A poorly designed system might identify human industrial activity as the main problem and pursue extreme solutions that no human would consider acceptable.
This is an illustration of what researchers call the AI alignment problem: ensuring that increasingly capable artificial intelligence continues to act in accordance with human intentions and values.
Of course, there is an enormous difference between recognising a theoretical risk and proving that human extinction is inevitable.
Nobody knows whether AI will ever become capable of independently taking control of civilisation.
But the fact that serious researchers are debating the possibility tells us that this technology deserves serious attention.
Meanwhile, AI Is Already Changing the World
While people argue about the end of humanity, something much more immediate is happening.
Artificial intelligence is already changing how businesses operate.
In healthcare, AI systems can help doctors analyse medical images, identify patterns and support diagnoses.
In software development, programmers increasingly use AI to write, review and debug code.
In customer service, AI assistants can handle enquiries that previously required large teams of employees.
And in financial services, artificial intelligence is being used to analyse financial statements, identify investment opportunities, detect fraud and manage risk.
Consider the investment industry.
Traditionally, an investment analyst might spend days reviewing company accounts, examining competitors, calculating financial ratios and building valuation models.
An AI-powered system can process enormous quantities of financial information in a fraction of that time.
Does that mean investment analysts will disappear?
Not necessarily.
But it does mean that an analyst who understands how to use AI may become significantly more productive than someone who refuses to embrace it.
And that is where the real economic transformation begins.
AI does not need to become conscious or superintelligent to change the world. It simply needs to make businesses more productive.
Will AI Take Your Job?
This is probably the question that concerns most people.
And understandably so.
If artificial intelligence can write reports, analyse contracts, create advertising campaigns, develop software and answer customer enquiries, what happens to the millions of people currently employed to perform those tasks?
History offers some perspective.
When agricultural machinery became widespread, fewer people were needed to work on farms.
When computers arrived, many administrative jobs changed or disappeared.
When the internet transformed retail, traditional high-street businesses faced enormous disruption.
Yet new industries and occupations also emerged.
The important difference with AI is that it can automate elements of intellectual work, not just physical or repetitive tasks.
Accountants, lawyers, financial analysts, programmers, journalists and even doctors may find that parts of their work can be performed by artificial intelligence.
However, replacing individual tasks is not necessarily the same as replacing entire professions.
Human judgement, accountability, empathy, creativity and relationships still matter.
In financial planning, for example, an AI system might calculate a client’s inheritance tax liability or produce an investment portfolio.
But understanding someone’s family circumstances, financial anxieties, ambitions and attitude towards risk involves much more than processing numbers.
My expectation is that AI will transform many professions, while creating opportunities for people who learn to work alongside it.
The transition, however, could be painful for those whose skills become less valuable.
Is AI Just Another Investment Bubble?
Now we come to the question that particularly interests me as an investment manager.
Is artificial intelligence genuinely creating enormous economic value, or are investors paying ridiculous prices for companies simply because they have attached the letters AI to their business plans?
The answer may be both.
We have seen this before.
During the dot-com boom of the late 1990s, investors became convinced that the internet would revolutionise the global economy.
They were absolutely right about the technology.
Unfortunately, they were often spectacularly wrong about the valuations.
Companies with little revenue, no profits and questionable business models attracted enormous investment simply because they had an internet-related story.
When the bubble burst, many disappeared.
But the internet itself did not disappear.
Amazon, Google and other businesses went on to become some of the most influential companies in the world.
The lesson?
A revolutionary technology does not automatically make every company associated with it a good investment.
The same principle applies to AI.
Companies are investing enormous sums in data centres, semiconductors, computing infrastructure, software and electricity generation.
Some will generate attractive returns.
Others may discover that the cost of developing and operating AI systems exceeds the revenue they can earn from them.
And some businesses currently presenting themselves as AI companies may ultimately have very little competitive advantage.
Investors should distinguish between genuine commercial opportunities and fashionable marketing.
The Hidden Cost of Artificial Intelligence
One aspect of the AI revolution that receives less attention is the extraordinary infrastructure required to support it.
Artificial intelligence does not operate on magic.
It requires powerful semiconductors, enormous data centres, sophisticated cooling systems and substantial quantities of electricity.
Training advanced AI models can be extremely expensive.
Running those models for millions of users also involves significant ongoing costs.
And as AI becomes more sophisticated, the demand for computing power may continue to grow.
This creates opportunities for businesses supplying the infrastructure.
But it also raises an important question.
Who ultimately pays for all this investment?
If technology companies spend billions developing AI systems but customers are unwilling to pay enough to generate an adequate return, shareholders could suffer.
That is why I believe investors should look beyond impressive demonstrations and focus on the fundamentals.
Revenue growth, free cash flow, return on invested capital, competitive advantage and valuation still matter.
Artificial intelligence does not repeal the basic principles of investing.
Could AI Actually Make Humanity Better Off?
It is easy to become distracted by frightening headlines and extraordinary stock market valuations.
But we should not overlook the potential benefits.
Imagine a world where AI helps scientists discover new medicines faster.
Where personalised education becomes available to children regardless of their family’s wealth.
Where businesses operate more efficiently, reducing costs for consumers.
Where doctors can identify diseases earlier.
And where scientific discoveries that once took decades can be accelerated through advanced computing.
These are not guarantees.
But they represent genuine opportunities.
One of the most exciting possibilities is that artificial intelligence could help address problems that humans have struggled with for generations.
Cancer research, climate modelling, energy efficiency, food production and scientific discovery could all benefit.
The challenge is ensuring that the economic rewards are not concentrated entirely among a small number of technology companies and their shareholders.
If AI dramatically increases productivity, society will need to consider how the resulting wealth and opportunities are distributed.
That is not simply a technological question.
It is an economic, political and social one.
So, Will AI End Humanity or Is It a Scam?
Perhaps the biggest mistake is believing that these are the only two possibilities.
Artificial intelligence can be a genuinely revolutionary technology without becoming an all-powerful machine that destroys civilisation.
Equally, AI can transform the global economy while many AI-related investments turn out to be terrible financial decisions.
The technology and the investment opportunity are two entirely different things.
My view is that AI has the potential to become one of the most important technological developments of our lifetime.
But I also believe we are witnessing enormous hype, unrealistic expectations and a great deal of money chasing businesses whose long-term profitability remains uncertain.
Some companies will become extraordinary success stories.
Others will disappear.
And many of us will discover that the greatest impact of AI is not something dramatic involving humanoid robots.
It will be the gradual transformation of how we work, communicate, learn, invest and live.
The real question is not whether artificial intelligence will take over the world tomorrow.
It is whether humanity can manage this extraordinary technology responsibly while ensuring that its benefits outweigh its risks.
And from an investment perspective, the question is equally important:
Can we identify the businesses that will genuinely create long-term value, rather than simply those telling the most exciting AI story?
Because history has taught us something very important.
Being right about the future does not necessarily mean making money from it.
And being frightened of the future does not stop it from arriving.
What do you think?
Will artificial intelligence become humanity’s greatest invention, its biggest investment bubble, or potentially its greatest threat?
Perhaps, in different ways, it could be all three.
I would be interested to hear your thoughts.
Tony Byrne, Managing Director
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*Risk warnings
The value of investments can fall as well as rise. You may not get back what you invest. The information contained within this article is for guidance only and does not constitute advice which should be sought before taking any action or inaction. All information is based on our current understanding of taxation, legislation, regulations and case law in the current tax year. Any levels and bases of relief from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. This blog is based on my own observations and opinions.
