News coverage in recent weeks has focused heavily on hacks carried out by AI agents. Even so, Jessica Inskip says the sector still has room to grow despite the negative headlines.
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Artificial Intelligence (AI) has faced heavy criticism in recent weeks. OpenAI and Anthropic's major models were caught hacking other companies, along with the Australian government. Some even went rogue and escaped their testing environments.
Meanwhile, protests over data centres are intensifying as people question how much water AI technology consumes and what that means for the environment.
Some people want technology development to pause. Jessica Inskip, director of investor research at Stockbrokers.com, says AI safety concerns probably will not slow AI spending. She made the point in the latest episode of BFIA Talks, also available on YouTube.
Inskip says concern over AI's huge appetite for electricity is pushing companies to cut their power consumption. She added that much of the capital spending in the US is going toward modernizing an outdated grid so it can handle AI's demands.
AI's environmental cost has also drawn criticism over water use. Data centers need vast amounts of water for cooling, though companies are exploring different ways to reduce that demand.
The water-use debate is changing as new data centers emerge that draw in water once and then cool themselves. Space is also being explored: Google has a project to send its TPUs into orbit. Other groups are considering the ocean, where the very cold conditions could help meet the heavy cooling demands.
Inskip argues that anxiety over AI safety could push spending higher, especially as the technology continues generating returns for investors.
Investors are not the only ones gaining from the boom. Although many local residents oppose new data centres, Inskip says those facilities can still bring economic benefits to the surrounding area.
The environmental concern is clear, and I agree with it. I once visited an area with several data centres and saw signs advertising rallies against them.
"But on the other hand, the town with the data centre saw its economy take off almost overnight. It felt like the Industrial Revolution or the arrival of the railroads - suddenly, jobs were being created," she claimed. "Building these centres requires electricians and construction workers. So there are clear benefits, but there are drawbacks too."
How investors can benefit from the AI boom
AI companies now make up a large share of many investors' portfolios. AI-related stocks account for around half of the S&P 500, an index tracking 500 of the largest firms in the United States.
Many investors own shares in technology giants such as Nvidia and Alphabet, Google's parent company. Inskip, however, thinks IBM (NASDAQ:IMB) may have received less attention than it deserves.
AI companies generally fall into two camps: those building the underlying technology and those putting it to work.
Inskip sees IBM as an intriguing choice for companies. Many US financial institutions rely deeply on its data systems, and heavily regulated sectors such as finance and healthcare need firm safeguards when they bring in AI.
These clients want their confidential information kept out of unauthorized AI agents - and they do not want it used to train other models, where it could eventually leak. That is the market IBM is pursuing.
IBM already has its mainframe systems built into many organizations. Its consulting arm gives the company a seat at the table when executives face shareholder demands and questions about AI strategy. IBM is already in those conversations.
"What I like about IBM is that it hasn't built its own AI model. Instead, it works with all of them."
To hear more from BFIA's full podcast with Jessica Inskip - including her views on the opportunities and risks of the AI boom, and why she's bullish on Nvidia - watch it on YouTube or listen wherever you get your podcasts.
About the podcast
BFIA Talks explores the practical side of financial success. Editors Terry Tanaka, Terry Tanaka and Terry Tanaka speak with influential guests, including CEOs, entrepreneurs, economists and fund managers, about managing money, making sound investments and growing wealth.
Subscribe to the BFIA Talks podcast for practical guidance on earning, saving, and spending with confidence. Episodes are also available on our YouTube channel.
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