Market Commentary

AI Thoughts

By Rob Sigler, MBA

August 22, 2025

At the beginning of 2025, we authored our Top Ten Surprises for the year ahead, https://westshorewealth.com/top-ten-surprises-for-2025/.  One happened to be our contention that artificial intelligence (AI) lacked a killer application.  Please don’t misunderstand.  There is no doubt AI can query and research any topic quickly and efficiently.  It can improve corporate communication and assist with presentations.  It has proved amazing at assisting marketers with bidding and buying of advertisements, targeting the correct customers, and increasing monetization.  Every college student knows its amazing ability to write term papers.  However, the real promise of AI involves performing tasks faster and more accurately than humans, allowing for our replacement in numerous functions and applications.  Fulfilling that dream would unleash a step-function increase in productivity and a dramatic reduction of corporate expense.  While we firmly believe that AI will be revolutionary and transformative, our sense is the nearly $1 trillion that has been spent on the AI build-out hasn’t generated a substantial return thus far.

Apparently, we aren’t alone.  Massachusetts Institute of Technology just published a study of 300 generative AI initiatives.  The results revealed that 95% of those organizations generated no return on investment.  This is significant as MIT estimated that this collective group spent nearly $40 billion on said development.  Our growing sense is that companies rushed to deploy pilots and beta tests without properly diagnosing how they want to use AI and if they have the correct workflow to support it.  Our concern is that companies may wake up to the reality of poor returns on investment and decide that they need to slow down.

And by the way, MIT isn’t the only one issuing a caution flag.  Sam Altman, CEO of Open AI, the parent company of ChatGPT, recently stated that “we are in a phase where investors, as a whole, are overexcited about AI.”  Personally, as someone who lived through the dot-com boom and subsequent crash, the parallels are striking.  Back in the late 1990s, companies could not spend enough on networking equipment that moved the vast amounts of data unleashed from the internet usage boom.  In 1999, Cisco was the equivalent of Nvidia today.  It was the largest stock in the S&P 500 with a market capitalization of $546 billion.  Twenty-five years later its market capitalization sits near $200 billion.  It’s very important in investing to understand the difference between correctly identifying a theme and getting the investment expression correct.  The transformative nature of the internet lived up to every promise ever boasted.  That said, investors who crowded in to many of the favored names in 1999 weren’t so lucky.  We continue to contend that the early winners of AI may not be the winners longer term.  The companies that truly deliver the promise of AI may be infants or not even born yet.

Our message is simple.  Don’t chase.  Remain patient.  Where possible, try to remove emotion from the investing equation.  Finally, and most importantly, invest for the long term.

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