In recent times, the stock market has been fueled by optimism surrounding artificial intelligence (AI). Tech giants have particularly reaped the benefits, as evidenced by the Nasdaq Composite's impressive 35% year-to-date surge and the S&P 500's 18% gain.
Winners and Losers
Despite the prevailing "everyone's a winner" attitude among investors, AI's ascent is unlikely to favor all companies and industries. According to Michael Schaffer, a prominent financial advisor, the rise of AI, including ChatGPT, will disrupt the status quo and create distinct winners and losers.
While some of this year's top-performing stocks, like Nvidia (up 237%), Meta Platforms (up 139%), and Tesla (up 134%), have thrived due to their ability to leverage AI, future success may not solely rely on AI. Instead, companies that possess robust businesses capable of withstanding the changes brought about by emerging technologies may come out on top.
Michael Schaffer, the managing director of investments at Wells Fargo Advisors' Schaffer Wealth Management Group in Deerfield, Ill., offers his valuable insights based on his three decades of experience. His team oversees approximately $4.5 billion in assets and serves a diverse clientele comprising high-net-worth individuals, ultra-high-net-worth clients, and small businesses. The comprehensive suite of services provided by Schaffer's practice includes trust and estate planning, retirement planning, insurance, and philanthropic assistance.
The Way Forward
During a captivating episode of The Way Forward podcast, Schaffer delves into various topics related to AI and ChatGPT, drawing on his expertise and shedding light on the economic and social impacts of these revolutionary technologies. He confidently asserts that the white-collar space will witness unprecedented disruption caused by AI's increasing intelligence and the ever-growing prevalence of data. Businesses will face challenges in sustaining growth and overcoming the destructive powers of ChatGPT and AI.
In conclusion, the rise of AI presents both opportunities and threats. Companies that possess resilient business models will stand a better chance of thriving in this fast-changing landscape. The future will undoubtedly be shaped by the transformative forces of AI, and businesses must adapt to succeed.
Industries that are Immune to Technological Disruption
In the world of AI and ChatGPT, many businesses are expected to face disruption. However, there are certain industries that will remain unscathed and even benefit from these technological advancements. According to Schaffer, healthcare and research industries fall under this category. While AI and ChatGPT may revolutionize various sectors, they are unlikely to impact businesses such as the railroad and bourbon industries. Consequently, investors are encouraged to consider the long-term potential of these industries.
Qualities of "Non-Disruptive" Companies
When analyzing potential investment opportunities, it is crucial to identify businesses that are resistant to disruption. Successful families and individuals who have grown their net wealth employ five key criteria when selecting businesses. Firstly, these businesses possess a protective "moat." Secondly, they have high barriers to entry, making it difficult for competitors to enter the market. Additionally, they hold a durable competitive advantage. Furthermore, management acts as a partner in the success of the business. Lastly, preference is given to businesses that consistently pay dividends while also experiencing growth.
Compounding Wealth Across Generations
The evaluation of businesses goes beyond the current investor's lifetime; it aims to create long-lasting wealth for future generations. This strategy recognizes the challenges faced by younger individuals in replicating their parents' success. By strategically identifying businesses with the potential for compounded growth, investors pave the way for a significant game-changer in terms of wealth preservation.
Building a Cohesive Team for Wealth Management
A crucial aspect of wealth management is the creation of a cohesive team. As a wealth manager, it is important for me to view my clients as partners in their financial journey. When building a team to support wealth management endeavors, it is essential to seek like-minded individuals. However, this does not mean surrounding oneself with people who always agree. On the contrary, a diverse team that challenges existing ideas can lead to more robust decision-making processes. The collaborative effort of a team that shares a common vision ultimately simplifies and enhances everyone's lives.