The Dangerous Geopolitics Of AI Stocks You Need To Know And Asymmetric AI Opportunities
China threatens American AI companies and infrastructure. The stock market overvalues AI. Learn about asymmetric investments in AI.
AI is the hottest stock market trend right now.
Companies like NVIDIA, Microsoft, and Tesla are soaring from AI hype.
Even my barber talks about AI and crypto investing.
That's a warning sign that AI is in a bubble.
With huge rewards come huge risks. China and the United States are in a race to determine which country will dominate AI tech.
For you as an investor, this means big opportunities and big dangers.
Problem: AI Stocks Are Overheated And Vulnerable
Many AI stocks are overvalued.
Investors assume these companies will keep growing forever.
That's not true for any company.
AI is still new. Many companies aren’t making real profits yet.
Retail investors get left holding the bag after institutional investors profit from the hype.
Remember, you only make money from an investment once you sell it.
AI Cold War
There’s then the growing AI competition between the United States and China.
But what if China out-innovates U.S. AI tech firms?
Or if a cyber attack hits a major AI company?
Or China bombs a data center?
Stock prices could plunge overnight.
Key Point: American AI companies face tough and ever-growing competition from China and new startups.
Solution: Don’t Chase Hype
Don’t throw all your money into the hottest AI or tech stocks.
Look for companies with real profits, not just buzzwords.
Look for asymmetric trades that AI requires, such as:
Data centers
Utilities
Uranium
Electricity
Water
Diversify into other sectors so one crash doesn’t wipe you out.
Pay attention to cybersecurity.
Companies with strong digital defenses are safer bets. A hack would tank a company's stock.
Do your homework, research, and due diligence before investing.
The United States Department of Defense writes in a 2023 brief that it warns:
The PRC [People’s Republic of China] presents a sophisticated, persistent cyber-enabled espionage and attack threat to military and critical infrastructure systems through its efforts to develop, acquire, or gain access to information and advanced technologies.
Key Point: Protect your money by diversifying and picking asymmetric trades that AI companies need to grow.
Why This Matters: Your Portfolio Could Take A Hit
A cyberattack by China or another malicious actor would crash AI stocks, affecting your retirement accounts, stock portfolio, and savings.
Many investors are piling into AI without understanding the technology or risks.
Don't be one of them.
The AI boom won’t last forever. Nothing lasts forever. Every bubble pops.
Smart investors prepare for the downside while riding the upside.
Key Point: A balanced and cautious approach keeps your investments safe in the AI boom.
Problem: China’s AI Growth Threatens U.S. AI Companies
China is pumping billions into AI.
Their tech giants are catching up fast.
American stocks could suffer if Chinese AI companies beat U.S. AI companies.
China doesn't play fair. China steals tech and intellectual property.
China subsidizes companies. Chinese companies have an unfair edge over American companies.
If U.S. companies lose market share, your stocks will drop.
Key Point: China’s AI push could hurt U.S. companies and your investments.
Solution: Bet On AI Companies With Strong Moats
Certain U.S. firms have deep moats.
NVIDIA's chips, Microsoft's cloud AI, and Google's research lead in the AI tech.
These companies have moats. Moats are strategic advantages that competitors can't easily copy.
Focus on businesses with patents, loyal customers, and government contracts. These AI companies are more likely to survive China’s rise.
Avoid small, unproven AI startups unless you’re okay with high risk. Only consider smaller companies if they have big companies as customers.
Key Point: Invest in AI and tech leaders with deep moats.
Why This Matters: Picking Winners Saves Your Money
Not all AI companies will succeed.
Some will get crushed by competition. Others will fail in the startup phase.
You lower your risk by choosing the top AI companies.
The AI market will shake out eventually. Be on the winning side when it does.
Key Point: Strong companies are safer investments in the AI race.
Problem: Cyberattacks Could Crush AI Stocks
AI runs on data. Data centers are hacker targets. Data centers are critical infrastructure since AI companies rely on them.
The stock could crash if a major data breach hits a company like Amazon, Tesla, or OpenAI. Investors would panic. A market sell-off would happen.
Cyber attacks continue to become more sophisticated. AI is used to launch cyberattacks. A single big hack could wipe billions from the market overnight.
Key Point: AI investors need to be aware of the risk of cyber threats to AI companies and infrastructure.
Solution: Invest In Companies That Take Cybersecurity Seriously
Check if an AI company has had past breaches.
Does the company talk about cybersecurity in earnings reports?
Firms with strong defenses are better long-term holds.
You can even invest in cybersecurity stocks.
Well-known cybersecurity companies are:
CrowdStrike (CRWD)
Palo Alto Networks (PANW)
Rapid7 (RPD)
Cybersecurity companies will benefit as threats to AI companies and infrastructure grow.
The number one cybersecurity threat is people inside companies doing dumb things.
Key Point: Companies with tight security are safer AI investments.
Why This Matters: One Hack Could Wipe Out Your Gains
Imagine waking up in the morning while you're drinking your morning coffee.
You turn on the news. All the news is talking about how a top AI company was hacked. It will continue to be in the news since the company will need to hire cybersecurity companies to identify the source of the vulnerability.
Your stock drops 30% or more from the news! You haven't even sold any yet to make a profit.
Savvy investors check the AI company's cybersecurity risks before buying. Cybersecurity is as critical as profits today.
Key Point: Ignoring cyber risks could cost you big if there is a cyberattack on an AI company or critical infrastructure that AI companies use.
Summary
AI is changing the world. AI is changing work and the market.
Invest wisely. Don’t follow the crowd.
Pick strong companies. Diversify your investments. Be aware of risks to AI companies and investments.
You can make money from the AI boom from asymmetric investments in AI companies and AI companies with moats.
Key Point: Stay cautious, stay informed, and don’t gamble your money away on hype.
Disclaimer: This content is for educational, entertainment, and informational purposes only. This is not business, financial, investment, or any advice. I write online about topics I find interesting. I make mistakes just like everyone else. Always consult a professional before making health, life, financial, investment, tax, or legal decisions.