The valuations of AI companies are likely somewhat overblown right now, Principal Asset Management Chief Global Strategist Seema Shah and Frank Funds CIO Brian Frank told Yahoo Finance Live (video above).
"We are significant believers in the broader long-term perspective of technology and, of course, AI is right at the center of that," said Shah. "I do think, though, as we look out over the broader market reaction over the last couple of months, that there's maybe a little bit of froth. There are a lot of expectations from investors, and probably some of those expectations will not be delivered, met within the next few months."
"I think from that froth, you could see a little bit of a pullback," she added, noting that long-term AI will still offer benefits to the companies that get it right.
In the last few months, companies like Nvidia (NVDA) and C3 AI (AI) have seen massive gains as AI has become tech's biggest buzzword. But if you're a retail investor, now perhaps isn't the best time to get involved in the AI hype, at least not for the biggest names in the sector, Shah said.
"Anything that can benefit or even ride on the back of some of these AI stocks and the [underlying] technology, we think, stands to do well," said Shah. "I have to say that for investors, at these prices, certainly for the ones like NVIDIA... it's probably not a great time to get involved, but there are other mechanisms within the broader market where you can get exposure to technology to the AI craze."
'I'm optimistic AI will actually increase employment'
Ultimately, it isn't just tech companies that stand to benefit from AI. Though there are a deluge of fears that AI will take jobs, there's reason to believe that AI will ultimately improve jobs in all sorts of industries rather than slash them, and facilitate a more productive overall economy, said Frank, who's taking an "optimistic stand" on how AI will affect employment.
"You hear different industries applying AI to their jobs and it actually makes people more efficient," he said. "It doesn't necessarily put them out of work, it just actually makes them more productive. So, I'm optimistic that AI will actually increase employment and [create] better quality employment, as well. It could be a great thing for everybody."
AI can also have benefits for the broader economy – if regulators don't halt innovation, Shah said.
"Overall, I think the one thing that we can say is that if technology is permitted to... fulfill the potential it has, there will be a very significant productivity boost to the U.S. economy and globally," she told Yahoo Finance Live.
However, Shah expects that regulators are increasingly likely to get involved, citing regulatory scrutiny as a "significant concern."
"I think it's been a concern for tech investors for many years, just waiting to see how regulators are going to respond to ever-improving technology," she said. "Now, from our perspective, things don't come in overnight, but you can see that [more regulation] is the direction Congress is going towards. For investors who have these very high hopes of what technology can deliver, there's a concern that regulations will pull back on some of that, and there could be some disappointment that, unfortunately, would pull down not just the technology sector, but the broader market."
Allie Garfinkle is Yahoo Finance's Senior Tech Reporter. Follow her on Twitter at @agarfinks and on LinkedIn.
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