What Warren Buffett thinks about artificial intelligence and investing

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Growth potential in artificial intelligence Investors were excited, bidding up shares of leading AI companies Nvidia, Microsoft, Alphabet and others throughout 2023 and into 2024. But what can the world’s largest investor do? Warren Buffett Think about artificial intelligence and its possibilities?

Here’s what Buffett has Late partner Charlie Munger We talked about artificial intelligence and its impact on investing.

What Warren Buffett believes about artificial intelligence

“I think that’s something I don’t understand at all,” Buffett told CNBC in an April 2023 interview.

Buffett told his friend Microsoft Founder Bill Gates showed him ChatGPT and was amazed by its capabilities.

“She reads every book, every legal opinion — and the amount of time she can save you if you do all kinds of things is unbelievable,” Buffett said. “I don’t really understand it – I think it’s an incredible technological advance in terms of showing what we can do, but I don’t know if we know what’s going on.”

Buffett also joked that he hoped someone would “fire him” if he was going to destroy humanity.

Former Google CEO Eric Schmidt has warned of the existential risks posed by artificial intelligence, a concern that Buffett has taken into account.

“If it scares him, it scares me,” Buffett said.

Munger on artificial intelligence

Charlie Munger, who died in November 2023, was a longtime associate of Buffett Berkshire Hathaway Vice President and was skeptical of the excitement surrounding artificial intelligence.

“I think AI is very important, but there’s also a lot of crazy hype around it,” Munger said in February 2023. Artificial intelligence will not cure cancer. It won’t do everything we want it to do. And there’s a lot of nonsense in it, too.

Buffett: Change is not an investor’s friend

When it comes to new technologies or rapidly changing industries, Buffett often prefers to sit on the sidelines. He has sometimes been criticized for being slow to realize the value of a particular thing Technology companiesAlthough Berkshire Hathaway is now among its major shareholders apple.

“The key to investing is not to evaluate how much an industry impacts society, or how much it is growing,” Buffett wrote in his article, “but rather to determine the competitive advantage of any given company and, above all, how sustainable that advantage is.” The year 1999 was when the technology bubble was approaching its peak.

Buffett said that instead of looking for companies that will be supported by new technologies, investors are often better served by looking for what will not change at all.

“The Internet is not going to change the way people chew gum,” Buffett told students in a 2001 lecture. “It won’t change the type of gum they chew.”

New industries have emerged throughout history that have dramatically changed society and how we live every day, but Buffett says that doesn’t mean the industries will be rewarding for shareholders. Airlines and automakers are examples of companies that have radically changed the world, but have often disappointed investors.

Buffett once said that he likes to think that if he had been at Kitty Hawk in 1903 when Orville Wright boarded the plane, he would have shot him. “Karl Marx could not have done as much damage to capitalists as Orville did,” Buffett said.

Asked at Berkshire’s 2023 annual meeting about the impact of AI on society and markets, Munger responded that he believes “old intelligence is working well.”

Artificial intelligence as an investment tool: what to be wary of

With the introduction of tools like ChatGPT and Google’s Bard, Investors may be keen to use artificial intelligence in their investment decisions. These tools can be useful in generating answers to questions that may require you to sift through a lot of data.

You may be able to get quick overviews of companies or industries and trends to pay attention to. AI models may also be able to quickly pull different performance metrics for different investments or asset classes, saving investors time and resources.

While these tools are designed to analyze massive amounts of data, they are likely to be less useful when it comes to investment judgments. After all, investment success depends on the future, which AI cannot predict.

There can also be challenges regarding the accuracy of answers generated by AI. Sometimes, an AI model will “hallucinate” and make up incorrect information, even though it may seem completely accurate. Investors will likely want to verify any information provided by these new tools before relying on them to make decisions. AI may be able to provide general investment advice in the way a financial advisor might, but it is unlikely to provide encouragement and wise advice during market downturns, which is something Best financial advisors Do.

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