Why buyers ought to fear in regards to the AI bubble (Video interview)

Investors are in a dilemma. How can they profit from stock market gains while avoiding a potential crash driven by an AI-fuelled spending frenzy?

The artificial intelligence rush has seen US tech giants switch from raking in cash to raising huge amounts to splurge on building out AI capabilities and data centres.

This has created probably the greatest capital expenditure cycle the world has ever seen, according to James Harries, co-fund manager of STS Global Income & Growth, who joins Simon Lambert on the latest video episode of the Investing Show.

James argues that when that amount of money is being spent, a large amount is likely to be misallocated. And with AI-linked firms driving US growth, the stock market and playing a fundamental part in America’s household wealth, the risk is heightened.

He explains why investors are right to be worried about an AI bubble, why he thinks we are nearing the end of market exuberance, and how he believes they can continue to invest around the world while mitigating the risks.

James discusses his investment approach that combines considering the downside first and looking for quality companies with robust earnings – and why this style of investing may have fallen out of favour in recent years but could pay off now.

Time stamps

0 secs: Introduction

34 secs: How James Harries and STS Global Income & Growth invest

2.04: How do you define quality investments?

3.00: The colossal AI spending boom 

5.27: What could end the stock market exuberance

7.40: The LLM and AI application problem

9.08: Where investors can look instead

11.16: Overlooked companies

12.37: Investing in the UK

14.50: Which stock would you hold for 20 years?