AI doom headlines aren’t spooking all investors
Retail investors’ response to AI doom headlines disproves the common notion that they move as a herd, writes Finimize CEO Carl Hazeley in today’s Notebook
Retail investors steady on AI
Earlier this month, AI bosses called for a slowdown. We saw markets do what markets do: react.
The stocks at the heart of the story took a beating. Nvidia fell more than three per cent, AMD dropped five per cent and the semiconductor index dropped almost six per cent. One week later the Nasdaq was back at a record high. Reading those headlines might give the most seasoned investors whiplash.
But as the markets – and the media – were digesting the latest AI scare, retail investors appear to have been doing what they often do: staying steady.
Our latest Modern Investor Pulse, based on 2,488 retail investors, was in the field as the slowdown news broke and gathered pace, so it’s a useful test of one of the most persistent assumptions about individual investors – that they’re driven by the headlines and quick to get spooked when markets wobble.
Our data doesn’t support it and it never has. Before the slowdown announcement, 44 per cent of our investors said energy generation assets were most likely to generate the biggest AI-related returns over the next three to five years, ahead of chipmakers at 41 per cent with the hyperscalers at 16 per cent. But from 12-14 Sep, energy’s lead narrowed to 40.5 per cent, chipmakers rose to 43.2 per cent, and the hyperscalers edged higher. So we saw movement, but it wasn’t a stampede. Neither is it evidence that investors were blindly carrying on. In fact, they appear to have been reassessing where opportunities might be.
Retail investors aren’t immune to sentiment, but the idea that they have a herd mentality looks increasingly incomplete. So when it comes to AI, the story might be changing but that doesn’t automatically mean the investment case changes with the headlines.
Can panels stop agreeing!
Agreement is free. Disagreeing with the person next to you costs something, and most people would rather not pay publicly. So you get people on a stage, taking turns to be reasonable. Question, answer, question, answer. Nobody builds on the person beside them. Nobody disagrees either. Everyone stays on message and nobody rocks the boat.
It’s dull, and damaging to the end goal – getting people engaged in the big issues in finance and investing. We learned this lesson the hard way. Our event NPS once fell more than 20 points because of a complaint: “It felt like a sales pitch.”
We’re better at that now, and so with that in mind and my tongue firmly in my cheek, I will say I’m looking forward to our Modern Investor Summit on 1 October. We’re kicking off with Bill Ackman, a man unlikely to agree with everyone else.
My message for our speakers is: say the thing the person next to you will want to argue with.
If everyone agrees, what’s the point of having the conversation?
Gambling on AI in San Fran
I was travelling in the US last week – bouncing between NYC and San Francisco – and if you think AI is hyped in London right now, you need to take a look at San Fran, where you can’t move for bumping into an AI billboard. It made me think – it’s probably the worst place in the world to decide whether AI is a bubble. If you’re bearish on AI, you see a bubble. If you are bullish, you see evidence for your conviction.
Investors are excellent at turning what they see into evidence for what they already believe. And yet the best test of an investment thesis isn’t finding more evidence to support it, it’s asking what you’d have to see to change your mind.
My advice? Don’t visit Vegas to assess whether gambling is popular.
Autonomous idiots
I recently caught a ride in a Waymo. It was much less terrifying than expected. In fact, they seem to drive better than most humans. But I’m still not sure what happens when one encounters an idiot in a Toyota. Teaching a car to drive safely is one thing; teaching it to anticipate the unpredictable stupidity of other drivers on the road is another.