Artificial Intelligence (AI) has received bad press in recent weeks. Major AI models from OpenAI and Anthropic have been caught hacking other companies and even the Australian government, ‘going rogue’ and leaving their testing environments in the process.
Meanwhile, debates around the environmental impact of AI technology are heating up, with protests centred on data centres and their water usage.
Some are calling for a pause in the technology’s development. But concerns around AI safety are unlikely to hinder AI spending, says Jessica Inskip, director of investor research at stockbrokers.com, in the latest episode of MoneyWeek Talks, which you can also watch on YouTube.
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Speaking to MoneyWeek’s digital editor-in-chief Kalpana Fitzpatrick, she said: “I don’t think they’ll slow down spending, because they could redirect that spending elsewhere. The debates might even fuel the spending.”
Inskip says that debates around how energy-hungry AI is are fuelling attempts by firms to reduce power usage. She said: “In the US, our infrastructure is incredibly outdated in regards to the grid, and so a lot of the capex spending is going towards updating that infrastructure so it can support [AI].”
Water usage has also been a significant flashpoint over the environmental impacts of AI, with critics pointing towards the huge cooling demands AI data centres have. But firms are thinking of innovative ways to approach this issue too.
“We see that even with the water usage [debate]. There’s new [data centres] that bring in water one time and then cool themselves. Now we’re exploring data centers in space. Google has a project where they’re taking their TPUs into space. [Others] are looking at even the ocean where it’s very very cold because of the cooling that’s needed.”
Inskip believes the concern around AI safety will in fact accelerate spending, not least because the technology is driving returns for its investors.
The beneficiaries of the AI boom are not just investors. Inskip claims that despite many locals being opposed to the building of data centres, they can actually be a boon for local economies.
“The environmental concern is very evident, and I completely agree with that. I actually visited an area where some data centres were and I remember seeing signs for rallies against these centres.
“But on the flip side, [the town] where this data centre was, the economy all of a sudden started booming. It’s like we had the industrial revolution or the railroads – it starts creating jobs,” she claimed. “You’re building these data centres and you need electricians and construction workers. So there is certainly good and bad with it.”
How investors can benefit from the AI boom
AI firms are now at the heart of many investors’ portfolios, with AI-linked stocks representing around half the S&P 500, a stock market index comprising 500 of the largest firms in the United States.
Many people will hold tech giants like Nvidia or Google’s parent company Alphabet, but Inskip feels that IBM (NASDAQ:IMB) may have slipped under the radar for investors.
AI firms can be broadly put into two groups: the ‘picks and shovels’, meaning the firms that are creating artificial intelligence, and the firms that are driving adoption.
For corporate adoption, IBM is an interesting stock pick, according to Inskip. She said: “On the enterprise side in the US we have IBM. A lot of financial institutions are very embedded with their data, and if you’re a financial system or a healthcare system and you’re incorporating AI, you’re highly regulated so you’re going to want guardrails.”
These clients would not want AI agents to gain access to unauthorised and confidential data, nor would they want their confidential data to train any other models and potentially leak. This is the market IBM is targeting.
“So IBM is already embedded with their mainframe systems. They have a consulting arm which means they’re in the room when executives are making decisions from shareholder pressure over what is your AI strategy, and IBM is already there.
“What I love about IBM is they don’t have their own [AI] model. They partner with all of them.”
For more on the opportunities and dangers from the AI boom and why Inskip is bullish on Nvidia, watch MoneyWeek’s full podcast with Jessica Inskip on YouTube, or wherever you get your podcasts.
About the podcast
MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick, Andrew Van Sickle and Cris Sholto Heaton are joined by influential guests – from CEOs and entrepreneurs to economists and fund managers – to share their top tips on managing money, investing wisely and building wealth.
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