AI-focused investment funds have delivered an average return of just 2.5% in the past year, having been outperformed by other sectors and generalist funds, according to new figures.
Though artificial intelligence has attracted huge investment in 2024 – an estimated $110bn globally – AI funds offered a fairly modest rate of return, according to research from London and Bristol-based Bowmore Asset Management.
The firm found that generalist tech funds beat the hyped-up AI sector, with average returns of 4.3%.
AI was also beaten by funds focused on payments, cloud computing, cybersecurity, fintech and video games.
The AI sector in its current form is based heavily on speculation and frontier technology, so it is possible that as it matures, the rates of return will improve but the eyewatering valuations handed to relatively recent entrants may suggest the hype is out of balance.
“AI remains a hugely exciting sector but it pays not to be too overweight in a sector and certainly not a sector where it becomes hard to justify valuations,” said Bowmore chief investment officer Jonathan Webster-Smith.
“AI companies had seen such a strong run in their share price that the sector had tempted investors away from some of their core principles such as diversification.”
Webster-Smith said risk-averse investors may be better off putting their money in safer bets like fintech, though “there are still plenty of exciting opportunities” in AI.
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