The stock market, especially on the technology side, is all about buzz words. Two decades ago, the buzz was all about internet stocks. A few years back, the buzz was all about e-commerce stocks. More recently, the buzz surrounded cloud stocks.
But now, the buzz has pivoted to blockchain and artificial intelligence.
Blockchain, which is the underlying technology supporting the Bitcoin framework, was thrust onto the main stage after bitcoin skyrocketed from under $1,000 to nearly $20,000 in 2017. That left investors salivating over blockchain stocks.
Artificial intelligence, meanwhile, is the next big step forward for technology companies. Whereas it was previously one part pipeline dream and one part sci-fi concept, AI is now inching closer and closer toward becoming a reality. From things like voice assistants, to smart home products, to machine-curated feeds, we are now seeing first-hand AI in its infancy. This has left investors also salivating over artificial intelligence stocks.
But are blockchain and AI stocks really the future? More importantly, are they good long-term investments at the current prices?
The answer is largely yes to both questions, but with some caveats.
Here’s a deeper look:
Is Blockchain the New Internet?
Blockchain is the underlying framework supporting bitcoin and multiple other cryptocurrencies. It is built on decentralization principles and utilizes crowd-sourcing to achieve tasks, as opposed to relying on a central authority or entity.
Because of this paradigm shift from centralization to decentralization, many have labeled blockchain as the new internet.
That may be true. But I don’t look specifically at blockchain as the new internet. Instead, I look at decentralization as the new internet.
Blockchain really isn’t the paradigm shift. The paradigm shift, as mentioned earlier, is from centralization to decentralization. And this shift has been happening long before blockchain went mainstream.
Just look at Uber or Lyft. Those two companies have successfully disrupted the entire transportation industry by taking power from the few (taxis), giving it to the many (anyone with a car) and creating a system that optimally pairs supply with demand.
Look at Airbnb. That company has successfully disrupted the entire accommodations industry by taking power from the few (hotels), giving it to the many (anyone with an extra room or house) and creating a system that optimally pairs supply with demand.
Instagram, owned by Facebook Inc (NASDAQ:FB) has done this in the modeling and photography worlds. YouTube, owned by Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL), has done this in the entertainment world. Shopify Inc (NYSE:SHOP) is doing this with e-commerce. GrubHub Inc (NYSE:GRUB) is doing this with online food ordering and delivery. Netflix, Inc. (NASDAQ:NFLX) is doing this with content production.
Decentralization is everywhere — and it’s working. Thus, I’m not necessarily investing in the long line of blockchain stocks for the next 5-10 years (Overstock.com Inc (NASDAQ:OSTK), Riot Blockchain Inc (NASDAQ:RIOT), Longfin Corp (NASDAQ:LFIN) and Pareteum Corp (NYSEAMERICAN:TEUM), to name a few).
Instead, I’m investing in decentralization stocks. That list is currently headlined by SHOP, but also includes GRUB, FB, GOOG, and NFLX.
What About Artificial Intelligence?
We aren’t quite there yet with AI — but we are getting very close.
Google recently unveiled Google Duplex, a shockingly smart voice assistant that can complete calls on your behalf. In the real-life examples of phone calls that Google showed us, Duplex was able to not only complete the task, but did so while being forced to think on its feet and respond to peculiar situations.
From all perspectives, it was a mind-blowing presentation that showed the world just how far we have come with AI.
Going forward, AI technology will only get better, and its use-cases will grow exponentially. That means the financial implications of AI are quite robust, and the companies that master AI will make tons of money.
When it comes to mastering AI, it’s all about data. The more data a company has to feed its AI machine, the more that AI will learn and become more autonomous. As such, when looking to invest in AI stocks, look for companies with the most data.
Google has the most data out there by a long shot. Facebook also has a ton of data. Amazon.com, Inc. (NASDAQ:AMZN) has a ton of very valuable consumer-purchasing data. Netflix also has a ton of data when it comes to movie preferences. Microsoft Corporation (NASDAQ:MSFT) and Apple Inc (NYSE:AAPL) have a bunch of user data as well.
Another way to play the AI revolution is by investing in the companies that supply the parts to make AI work. Namely, I point investors to NVIDIA Corporation (NASDAQ:NVDA).
Bottom Line on Blockchain & AI
The future is coming, and in that future, decentralization and AI will be everywhere.
Consequently, investing in decentralization and AI stocks today is a smart move that should yield handsome profits in a long-term window.
As of this writing, Luke Lango was long FB, GOOG, SHOP, AMZN, and AAPL.