Should you retain holding the ‘retro’ shares now embracing AI?

War in the Middle East continues to rock stock markets. Heightening the alarm is one aspect of the conflict: artificial intelligence (AI) tools are enabling bombing and other attacks faster than ‘the speed of thought’.

Tuesday’s 10 per cent jump in the Vix Volatility index – known as the ‘fear index’ – reflected the apprehension felt by investors about what a prolonged period of hostilities, driven by AI, could mean.

The uncertainty will continue. But this is a moment for defensive action, not doomscrolling and panic selling. It makes sense to stash some cash in safe havens.

But it is also worth checking out the benefits flowing from AI in areas such logistics, manufacturing, pharmaceutical and retail.

Not so long ago, some of these companies were considered ‘old economy’. But now backing businesses that are adopting AI has been dubbed the new investing ‘megatrend’ by US brokers Morgan Stanley.

These ‘AI adopters’ are evolving, spending trillions to make their assets and workforces more productive in a process that appears unstoppable, despite the impact on employment. Top bosses, such as Aviva’s Amanda Blanc, are acknowledging this possibility, which will have huge consequences for the economy.

You may be dismayed that the UK and other governments seem woefully under-prepared for this jobs cataclysm, but according to Morgan Stanley: ‘AI is no longer an experimental technology, it’s a foundational driver of business strategy.’

So carrying out a spring clean of your portfolio to check if you can share in the bounty could be therapeutic – and rewarding.

OLD ECONOMY WINNERS

The prominent adopters – businesses assertively harnessing 21st century tech – include some that have been around for a while.

David Coombs, of wealth manager Rathbones, cites Canadian Pacific Kansas City, the railroad established in 1881.

Shares in the group, which owes its dominance of the freight traffic to harnessing AI, are up nearly 11 per cent this year to Can$113 (£62), but are still rated a ‘buy’ with a target price of $132 (£72.40).

Coombs, who has bought the stock, sees its performance as evidence of a shift in investing, following a period of obsession with Silicon Valley tech giants.

He also highlights Caterpillar, the 101-year-old US firm famous for its big yellow trucks. It supplies the generators that give around-the-clock electricity to the data centres which provide the computing power for AI.

Its shares have doubled in price in a year, and were $692 (£515.97) yesterday. But analysts are optimistic about the outlook, with one broker setting a target price of $877 (£654.92).

Other AI adopters being tipped are delivery specialist FedEx and Siemens, the engineering titan.

Banks are well-positioned to exploit AI. Jamie Dimon, chief executive of JP Morgan – the world’s largest bank – this week said it was now doing most things ‘better, faster and cheaper’.

It and Barclays are among the banks held in the iShares AI Adopters & Applications ETF (exchange traded fund). The fund has stakes in pharma groups Merck and AstraZeneca, too, which this year acquired the US Modella AI business to ‘supercharge’ delivery of cancer drugs.

RETAIL OPPORTUNITIES

AI is a boon for retailers for various reasons, such as the ability to make the most of the valuable information held on customers.

Tesco, founded in 1919 and now Britain’s number one supermarket, holds vast amounts of data thanks to its Clubcard division,

This should be enhanced by the £30billion chain’s deal with the French start up Mistral AI to devise ‘cutting-edge solutions’ for operations. Tesco shares (of which I hold a small amount) dipped this week, but are 24 per cent higher than a year ago at 466p.

Dr Clive Black, of brokers Shore Capital, sees further expansion ahead and rates them a ‘buy’.

Last month the giant US retailer Walmart said its Sparky AI digital assistant ensures customers add as much as a third more goods to their baskets, underlining the results being produced by this $1trillion (£746billion) corporation’s commitment to embedding AI everywhere.

Its shares are up 31 per cent in a year to $127 (£94.85). Brokers continue to see them as a ‘buy’, hoping the latest innovations, including a scheme allowing customers to use ChatGPT to buy more, will yield results.

POTENTIAL BARGAINS

Some companies taking advantage of AI are less well regarded.

It may be at the heart of the operations of such software businesses as the data and analytics group Relx and the property portal Rightmove, but last month their shares were left reeling by the launch of add-ons to the Claude AI system from Californian start-up Anthropic. These seemed to threaten the existence of all companies providing software as a service (‘Saas’). Rightmove shares tumbled sharply.

This month tensions between Anthropic and the US Pentagon over Claude’s role in combat and surveillance have been more of a talking point. And there has been a reassessment of the apocalyptic predictions for software firms.

Relx is still one of Bank of America’s 25 stocks for 2026, suggesting it is too early to know whether Claude will annihilate software businesses, or act as a helpmate. Rightmove is rated a ‘hold’ by analysts, while Relx is a ‘buy’.

This is a reminder that a market rout can create bargains. Jonathan Raymond, investment manager at Quilter Cheviot, suggests you have some money available as ‘dry powder’ to acquire shares at a discount.

The attention surrounding the AI adopters is a reminder that geopolitical events tend not to have a lasting effect on markets.

Raymond says: ‘Wars, pandemics and crises come and go, yet markets continue to march higher over the long-term due to human ingenuity and progress.’

SAFE HAVENS

It could pay off to diversify into funds that aim to exploit current conditions while offering some protection. Darius McDermott, of FundCalibre, cites Artemis Short-Duration Strategic Bond, Man GLG Absolute Value and Trium Alternative Growth.

The instability arising from the war has lifted oil prices above $90 a barrel. Some even predict that a lengthy paralysis of the Strait of Hormuz (through which 20 per cent of the world’s supply passes) could send crude to $108, against $65 before the strikes on Iran began.

McDermott says the iShares World Energy ETF gives exposure to this sector. Amid the ups and downs, are oil firms scurrying to adopt AI to fuel every part of their business – from drilling to marketing? You can bet on it!