Quarterly Commentary – September 2025

WHAT TO MAKE OF INVESTING IN ARTIFICIAL INTELLIGENCE?

I recently read an article in The Atlantic questioning if AI will really improve the global economy to the level it’s promoted to be.  It was a good read and an idea I’ve been batting around in my head for a while.  Which led me to wonder, how exposed are our clients’ portfolios if AI turns out to be the next dotcom bubble? 

What we know from the dotcom experience is that it did indeed change the way business operates.  But instead of the web controlling business, it became an add-on… another tool in the toolbox to grow the sharing of information and marketing/buying/selling of products.   At this point, I see AI being very similar.  It will materially change the way we do business and gain information, but at this time, I don’t see it controlling business.

The article reminded me of a conversation I had with a good friend early in the summer.  He runs a very successful business where AI has potential to materially change the way he does business.  And being the person he is, he has gone deep into the weeds investigating and implementing AI applications for his business.  His comment to me (paraphrased): “Existing employees need constant conversation that AI will not replace them, but AI will enhance what they are able to do.  In return, they will need to adapt and learn along the way to keep themselves valuable to the organization… which isn’t really any different than before AI.  It’s just that AI is the new “thing” to adapt to.”

Assuming he’s right, that AI will simply be an added function in one’s day, is the current uptick in AI-related stock prices inflated?  If yes or no, how to best invest in AI-related companies?

There definitely is a risk of stock prices being inflated.  But how much is froth and how much is legitimate?  Ask me in 5 years and I’ll tell you!  For now, our client portfolio exposure is somewhere around 3% and 7% (depending on the portfolio) in companies actively pursuing AI technology development.  Because of our exposure, we’ve made a point to focus on companies where there are multiple business revenue sources.  In other words, AI is just one part of their business model… companies like Amazon and Microsoft.  But, on top of this, our focus on quality businesses has not changed… companies with solid balance sheets and revenue statements.  Companies with lots of cash and low debt loads, large market share on other “things”, large cash-flows and relatively low expense ratios.  This means we participate in the upswing, and if there’s an “AI pull-back”, while we won’t be immune, our exposure is mitigated.

Ultimately, investment fundamentals are key… diversification, solid balance sheets, profitable cash-flow statements, large market share, etc.  It may not always be sexy, but it is very dependable!  And that helps steadily build wealth and sleep at night!

The irony is this… if indeed, it is a bubble, and there is a 50% pull-back in AI-focused companies, their stock prices would simply fall back to the “normal” range!  This is the perspective we all need to keep in mind.

I hope this input is helpful.  I hope you are enjoying the fall colours and we will keep in touch.

All the best,
Bryson

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