Patience is a virtue in a variety of pursuits, including investing. However, human nature is such that we often want benefits or rewards immediately. This behavior often isn’t conducive to long-term investing success. Still, the value of patience is worth remembering, particularly as it pertains to the artificial intelligence (AI) investment thesis.
For investors engaged with exchange traded funds such as the Invesco QQQ Trust (QQQ ) and the Invesco NASDAQ 100 ETF (QQQM ), it’s advice worth remembering because much of the recent volatility incurred by those ETFs and their AI-related holdings is attributable to the arrival of “the show me” moment. Translation: analysts and investors want to see more in the way of tangible AI results and far less hype.
That’s a credible demand and one that can help astute investors recalibrate AI expectations while reducing the potential of falling victim to hype. Take the case of the much discussed $1 trillion in AI-related spending. That estimate has been discussed in terms of 2025. The $1 trillion in spending could certainly prove accurate, but the end of 2025 timeline is unlikely, confirming that QQQ/QQQM investors need to be patient.
Perspective Needed
For investors tapping QQQ and QQQM as AI proxies, patience and perspective are required. Think about perspective in these terms. Overall AI spending was less than $70 billion last year. Getting to $1 trillion by the end of next year would border on the absurd.
“Even if investment in AI suddenly nearly doubled this year and next—mirroring the near doubling of NVIDIA Corp.’s data center revenues in recent years—AI spending would amount to ‘only’ about $129 billion in 2024 and $248 billion in 2025. Those would be tremendous outlays, to be sure. Perhaps unprecedented. But $1 trillion in AI investment by 2025 would require 286% growth,” according to Vanguard research.
Perspective is important for another reason. AI is often framed as a disruptive, revolutionary concept on par with electricity and the telephone. Over time, those claims could be validated, but near-term effects for AI stocks and ETFs such as QQQ and QQQM may be more muted because profits might not accelerate at the pace demanded by impatient investors.
“We wondered how fast profits would have to grow to unwind the excess in the U.S. stock market. Assuming a three-year horizon for a return to fair value, the answer is about 40% per year. This is double the annualized rate of the 1920s, when electricity lit up the nation—not to mention economic output and corporate income statements,” observed Vanguard.
Bottom line: Patience and perspective can keep AI investors in the game for the long haul, potentially positioning them for larger gains.
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