AI stocks like Nvidia are surging. Should you buy into the hype?

Artificial intelligence has become the latest 'buzzword' on the stock market. Here's how to navigate the hype if you're curious about adding AI stocks to your portfolio.

The blockbuster growth of stocks such as chipmaker Nvidia in recent weeks shows investors are excited about the potential of artificial intelligence, some experts say.

There could be money to be made in artificial intelligence, according to wealth managers who spoke to Global News, but they say there are some risks tied to the sector that might have you thinking twice about going all in on AI.

Nvidia made headlines this past week as the California-based semiconductor company surpassed a valuation of US$1 trillion, joining an exclusive club with the likes of Apple and Microsoft who’ve crested that bar. The company’s stock on the tech-heavy NASDAQ was up roughly 175 per cent on the year as of Friday afternoon.

Allan Small, a senior investment advisor who runs his own firm with iA Private Wealth, says Nvidia’s rapid rise comes because of its commanding market position as one of the few companies building the chips capable of powering the artificial intelligence applications that have dominated headlines in recent months.

The advanced capabilities of ChatGPT, OpenAI’s chatbot that can write high schoolers’ English essays, recommend new recipes and even pass the bar exam, has some futurists imagining a world where AI revolutionizes business and everyday life, he explains.

Other chipmakers such as Advanced Micro Devices have seen share prices surges this year for a similar reason to Nvidia’s rise, Small tells Global News. Other big names in tech such as Google parent Alphabet and Microsoft are also seeing boosts, he says, as they talk up their own AI plans and look to compete with OpenAI.

“I think with all the talk about ChatGPT over the last six months or so, that has really brought artificial intelligence, at least the conversation about it to the forefront,” Small says.

“Any company that has mentioned AI in their most recent earnings statements or in any interviews by their CEOs, (their) stock prices really jumped because what many people believe is that artificial intelligence is the next thing.”