By Marc Lichtenfeld, Wealthy Retirement, 2024-06-15
Artificial intelligence (AI) can and will do a lot of things…
I expect it to revolutionize medicine.
Instead of scientists searching for years for a molecule that may treat a disease and then spending many more years and hundreds of millions of dollars to figure out whether it works, AI can take every piece of knowledge about that disease and come up with likely drug candidates, drastically reducing the drug development time frame.
And AI can answer more questions than Google because it allows you to ask follow-up questions or modify your requests.
When I describe to my kids what life was like before the internet, I'm pretty sure they picture it in black and white and everything moving at a snail's pace. I suspect 20 years from now it will be the same when we talk about the pre-AI era.
I believe AI will be like the internet revolution but bigger. So that leaves investors dying to know the answers to two questions…
1. Which AI stocks should I buy?
Many investors are looking for that tiny company that is going to become the next Microsoft (Nasdaq: MSFT).
They may be out there, but it is still very early in the game. Remember how many internet companies there were that died? Netcentives, theGlobe.com, eToys and – of course – the infamous Pets.com…
Here's my advice. Instead of searching for the next Microsoft, choose Microsoft. The tech giant is already devoting lots of resources to AI, including a 49% stake in ChatGPT, and not many companies have more resources than Microsoft.
Other tech giants, like Amazon (Nasdaq: AMZN), Meta Platforms (Nasdaq: META) and Cisco Systems (Nasdaq: CSCO), will likely keep their commanding leads. Nvidia (Nasdaq: NVDA) is already one of the big winners, and while it will face competition, it has a lead over other chipmakers in the AI space.
Go with what you already know and who is already a dominant player.
But there's a second question I've been seeing from readers…
2. How can I generate income from AI?
As you likely know, the majority of growth stocks (including most tech firms) don't pay dividends – and those that do pay dividends often have unimpressive yields.
That's because they invest their excess cash into growing their businesses rather than paying it out to shareholders.
Of the five stocks I mentioned above, Cisco Systems is the only one with a yield above 1%.
With many of the leaders in the tech sector – and the AI space, specifically – opting not to pay dividends, some income investors are feeling left out in the cold, unable to participate in the market's latest big trend.
The solution is to find the rare AI plays that give you the best of both worlds: explosive capital gain potential AND stable, reliable income.
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