It’s hard to turn a corner these days without hearing news or conversations about Artificial Intelligence (AI). In less than a year, it seems this revolutionary technology has leaped from Silicon Valley think tanks to our own living rooms. At lightning speed, it has invaded our workspaces, our schools, and our homes. The result: AI is dominating our conversations, our focus, and (no surprises here at all) the stock market.
That kind of attention is understandable. The promise of AI is enormous. Already we are witnessing AI’s ability to analyze data, generate insights, and automate tasks in ways that are redefining productivity and creativity across nearly every industry. And we’re being told by the experts that this is just the tip of the AI iceberg. But as we’ve seen during other times of innovation and breakthrough, investor enthusiasm and opportunity can quickly slide into the danger zone of speculation and risk.
At LCM, we see both sides clearly. AI is shaping the future—but as investors, our job isn’t to chase the story of the moment. It’s to participate in long-term innovation while maintaining the discipline and diversification that protect our clients’ goals over time.
What’s driving the AI surge…
Corporate investments in AI have exploded over the past two years. Some of the largest technology firms—Microsoft, Alphabet (Google), Meta, Oracle—are each spending tens of billions of dollars annually in research and development to try to win the AI race, while chipmakers like NVIDIA and AMD are scrambling to meet the massive demand for the specialized processors required to power all things AI. (Note that the links above point to recent news articles about major AI investments by each of these key players.)
What we’re witnessing today may feel familiar to long-term investors who have experienced past ‘picks-and-shovels’ moments. During the California Gold Rush, the most reliable profits were made not by the miners seeking fast fortunes, but by the fast-thinking entrepreneurs selling the picks and shovels they needed to do the work. Just as we saw in the dotcom era, the biggest, most profitable players (who are equally fast thinking!) are building the infrastructure that everyone else will rely on.
Amid today’s rush, not every investment is paying off. A recent MIT study found that 95% of organizations experimenting with generative AI are seeing little or no measurable return yet. Training and running these systems is expensive, requiring immense computing power, energy, and specialized engineering talent. In short, AI’s promise is real, but the payoff will take time.
How we’re investing in AI…
As always, our portfolios are designed to capture long-term growth—not chase wild returns. (For the how and why behind this philosophy, read our article Time, not timing from May 2025). Because we see the long-term potential of AI, we are invested in the space. But the way we invest is designed specifically to balance opportunity and protection over time. How? By investing primarily in established, mega cap technology leaders that have the resources to invest heavily in AI’s next generation.
The tech leaders driving today’s AI boom also share traits that make them wise investment choices: deep resources, diversified businesses, and proven track records. By owning them, we gain exposure to AI’s growth without taking on the speculative risk of early-stage startups. Also, many of these companies have made it part of their AI strategy to acquire smaller companies that are showing real promise in specialized AI applications. That means our clients benefit twice: first through the financial strength of these proven market leaders, and again through the upside of their intelligent (pun intended) acquisitions.
By investing in the ‘big fish’ that are expanding their earnings power through AI adoption, we’re able to benefit from all AI has to offer—without relying on the minnows that are still finding their way.
Where we’re staying cautious…
It’s hard not to be intrigued when a headline announces an AI stock that’s up 800%. But context matters. Many of those companies were tiny ‘penny stocks’ before their headline-making surges—and few have meaningful profits or staying power.
Our focus is on lasting returns, not lucky streaks. We grow our portfolios by balancing innovation with discipline—by participating in areas of durable growth while protecting against over-exposure and hype.
We’ve certainly been down this road before. From Tulip Mania in the mid-1600s to Britain’s Railway Mania two centuries later, investors have often chased the next big thing—sometimes pure speculation, other times genuine innovation. Railways did transform industry and society around the globe. But many investors lost money before real profits arrived. The same pattern repeated itself during the internet boom a century and a half later. Ask anyone who lost money in the dotcom bust and they’ll tell you: the technology was transformative, but timing was everything. Tulips, trains, and the internet may have little in common, but all went through waves of speculation before the true long-term winners emerged.
We believe AI is no different. Technologies that change the world tend to over-promise early and over-deliver later. That’s why we believe the best approach is to participate prudently—staying invested in the companies with the scale, balance sheets, and patience to see it through.
Even the world’s largest financial institutions are approaching AI with a long-term mindset. JPMorgan Chase recently announced a decade-long plan to invest up to $10 billion in “frontier technologies,” including AI and quantum computing. The goal: to strengthen US competitiveness and foster critical innovation over time.
When financial leaders like JPMorgan Chase make it clear that they see AI as critical—and when they literally put their money where their mouth is—it’s testament to AI’s long-term potential. We believe it’s clear that AI will reshape the economy. But we also believe strongly that responsibly capturing that opportunity requires patience, diversification, and a clear view of value.
Where we go from here…
One side effect of the AI boom has been an increasingly concentrated stock market. Today, the ten largest companies make up roughly 40% of the S&P 500’s total value—an all-time high. While that concentration has fueled much of the market’s recent performance, it also means index returns rely more heavily on just a handful of dominant names.
As investors, that scenario presents us with both opportunity and risk. Exposure to innovation is essential, but diversification remains the best defense against volatility. Our portfolios are structured to hold the right balance, allowing you to benefit from technological progress while maintaining stability that is delivered through other industry sectors and asset classes.
We believe AI is poised to influence nearly every corner of the global economy—improving productivity, reshaping industries, and creating new opportunities we can only begin to imagine. But believing in AI’s future doesn’t mean abandoning sound investment principles. Our approach remains the same:
Invest with purpose, not emotion: We avoid chasing trends or reacting to headlines.
Stay diversified: Innovation is powerful, but no theme should dominate your wealth plan.
Think long-term: The winners in every technological revolution have rewarded patient investors—not those who tried to time the peaks.
As Warren Buffett once reminded investors, “Nothing sedates rationality like large doses of effortless money.” At Leisure Capital Management, we’re excited about what AI can bring, but our focus will always be on investing wisely to help you reach your wealth goals with clarity, balance, and confidence.
Questions? Comments? We’d love to hear from you.
