What’s in the blog?
This blog talks about the excitement and the skepticism around AI and tech stocks. You’ll see what’s fueling the hype, where the risks and warning signs lie, and how to strike the right balance if you’re looking to invest. We have also discussed about the promising Indian tech companies riding the AI wave, so you can make smarter, safer choices for your portfolio.
Table of Contents
Even Sam Altman, the CEO of OpenAI (yes, the man leading the AI revolution), has admitted that the AI market “feels like it’s in a bubble.”
If that made you pause and wonder whether your tech-heavy portfolio is standing on shaky ground, you’re not alone. Every second investor I meet these days is confused: Should I double down on AI? Should I diversify? Is it hype or is this the future?
And that’s exactly what we’ll talk about in this blog.
What’s Fueling the AI/Tech Stock Buzz?
AI has suddenly become a part of everything from our phones to our cars, and even the shows Netflix suggests to us. No surprise then, companies like NVIDIA, Microsoft, Google, and Meta are making truckloads of money from it. Investors are chasing the wave to earn good returns. Because, why not?
The reason for this sudden surge in AI and Tech stocks:
- AI in daily life – A few years back, AI sounded futuristic. Today, we casually chat with bots, let our phones finish our sentences, and read news about driverless cars. This speed of adoption is exactly what’s making investors so bullish.
- Sky-high valuations – Many of these stocks are trading at 30–40 times their earnings, compared to the healthy 20–25 range. In simple words, investors are willing to pay extra today, just for the hope of bigger growth tomorrow. It’s investors’ optimism, bordering on overconfidence.
- FOMO factor – We humans hate missing out. And right now, retail investors don’t want to be the ones who sat on the sidelines while the “AI train” left the station. Even if prices look inflated, they’re buying in, hoping future gains will justify the risk.
- Big bets from all sides – It’s not just retail investors. Governments and global industries are pouring billions into AI. From healthcare innovations to fintech automation and smart manufacturing, everyone is betting that AI will reshape the future. And when such large players back a trend, it creates a powerful tailwind.
All these factors make AI stocks look unstoppable, right? Wait! Things are never this straightforward in the market. Let’s look at the other side of the story.
Signs That AI Might Be Overhyped
Every revolution comes with its share of risks, and AI is no exception. For all the excitement, there are also a few warning signs that remind us not to get carried away.
Take Sam Altman’s recent statement for example… He has compared the current AI frenzy to the dot-com bubble. Back then, sky-high expectations sent tech stocks soaring, but reality eventually caught up.
Many, including Altman, fear the same story could repeat itself with AI.
Then there are the bigger economic headwinds. Rising interest rates are making borrowing costlier, export bans on chips are disrupting supply chains, and concerns about a global slowdown could all put a dent in AI’s rapid growth story.
Another sign worth noting is that institutional investors are already booking profits, while retail investors are pouring in money. History shows that when the pros start exiting while the crowd is still rushing in, it often signals a bubble forming.
And let’s not forget the regulators.
Governments around the world are watching Big Tech closely, with new rules on antitrust and AI development already on the table. Stricter oversight could slow things down and squeeze margins.
Should You or Should You Not Invest in AI/Tech Stocks Right Now?
At this point, you may say, “Rohit, please stop confusing us and tell us whether we should invest in AI/Tech stocks or not.” But, listen, I’m trying to help you see both sides of the coin so that you can make informed decisions.
One thing is sure: AI is here for the good, and it is not going away. Analysts expect AI to add trillions of dollars to the global economy by 2030.
But chasing the hype is risky. Be it AI or any other sector, the fundamental rules of investing remain the same. You must choose fundamentally strong, low-debt and high-growth companies. And, even then, you shouldn’t put all your eggs in one basket. You can put 10-20% of your portfolio in AI/Tech sector to ensure you are utilizing the momentum in the sector to grow wealth without exposing yourself too much.
If you are looking to invest your money in this booming sector and want to stay safe, you should look to invest in companies providing infrastructure to the AI rather than flashy AI startups. This can be semiconductors, cloud computing and enterprise software.
Indian AI/Tech Stocks to Watch For
As I said earlier, you do not necessarily need to be directly investing in flashy AI startups. There are a number of established companies that can help you ride the AI wave.
My Take
AI is real. The hype is real. And, the risk is real. If you don’t want to miss the rising tide nor do you want to regret chasing hype, you must balance your approach.
Put a fraction of your investment into the AI basket, but do not forget to diversify. When I say diversify, I do not mean just the tech companies supporting AI. You need to look at other promising sectors other than AI. Investments in cybersecurity, clean energy, utilities and consumer staples can help you grow with stability.
Frequently asked questions (FAQ)
Investing in AI stocks will be a smart decision if you know how to pick the fundamentally strong stock and balance your investment with diversification. Currently, it is one of the fastest-growing segments in the tech sector.
Some experts and analysts believe that there may be a probability that the AI boom can just be a bubble like the dot-com boom. This perspective has come into the mainstream media after the statement of Sam Altman, the CEO of OpenAI.
Not all AI stocks are placed equally. There are obviously a few overvalued and overhyped AI stocks because markets expect rapid growth. You need to assess individual stocks based on the required parameters before jumping to the conclusion if they are overvalued or not.
Many Indian IT majors (TCS, Infosys) have stronger fundamentals. They may offer steadier growth than chasing global hype.
