Our old friends, fear and greed, play an enormous role here. It is evident that greed is on the forefront as AI is perceived as the subsequent gold rush. If latest AI IPOs result in rapid doubling or more, who would not wish to take part in such a wealth creation event? Meanwhile, fear manifests itself in two ways. Most investors with a high proportion of stocks as an asset class are naturally concerned a couple of stock market crash, especially after the bullish moves we have seen during the last 12 months or two. But there’s also what’s referred to as FOMO, or the fear of missing out on a hot innovation that guarantees untold riches down the road. AI seems to embody each forms of fear (although one could argue that FOMO is just one other manifestation of greed).
In my view, AI is a subject that young investors must a minimum of partially embrace, well into the age of the Registered Retirement Income Fund (RRIF). Growth is the popular strategy for those just starting their investing profession, especially for tax-free savings accounts (TFSAs). And if there’s one transformative innovation that appears poised for major growth in the long run, it’s AI.
But for those in the danger zone of retirement – perhaps for you too, dear reader! – there’s a possible danger of jumping fully on the AI bandwagon. While AI mustn’t be ignored as a key growth driver for the “satellite” or “exploration” portion of a portfolio, I can be cautious about constructing the core of a well-diversified global portfolio around AI.
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All of those trade-offs were explored in a webinar hosted by my website in collaboration with The Successful Investor/ in early July.TSI Network.cawhich focused on the prudent way for (relatively) conservative investors to leverage the AI theme. While I announced the webinar on my pageThis column is my first report on the event.
In the webinar, TSI account executive Bob Wiseman began by noting that investors “rapidly adopted” AI in the primary quarter of 2025, flocking to high-growth AI-driven stocks corresponding to Nvidia, Amazon, Microsoft, Alphabet and a wide range of AI startups. He didn’t name individual stock names within the latter group, but based alone exposure to the sector, they would come with “neo-cloud” providers like Coreweave and Nebius.
The AI sector is being affected by the events
However, within the third quarter of 2025, fears of a possible AI bubble materialized, either within the minds of some investors or in media coverage of the phenomenon. Investors, Wiseman said, began to wonder if AI costs would outpace revenues for years and even a long time. This pondering then gave method to a “flight to reality: a retreat from AI-linked stocks to sectors of the old economy such as resources, manufacturing and utilities.”
Wiseman described several subsequent events that either pushed the AI issue up or down, corresponding to that in China DeepSeek Fear that brought down names like Nvidia in January 2025, and an MIT study in August 2025 that found 95% of corporations weren’t seeing returns from generative AI. But markets also rose in May 2025 as sales of Nvidia chips to data centers surged after markets reacted to the initial tariff shock. And February 2026 saw a general surge in markets after payments processor Block announced that AI had helped it cut 4,000 jobs.
In short, this can be a volatile sector. As an unknown wag once said about predicting future directions of the stock market, “It will fluctuate.”
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Still, Wiseman said, AI stays vital since it has a “transformative impact” on major economic sectors as diverse as healthcare, manufacturing, financial services, promoting, software development and media/entertainment.
I used to be impressed by a slide showing that conservative investors could also be higher off sticking with the massive names leveraging AI, including the so-called “hyperscalers,” somewhat than the lesser-known pure-play AI startups. It showed that the one-year performance of the Global X Artificial Intelligence & Technology ETF (AIQ/Nasdaq) remained relatively flat, while household names like Intel rose greater than 500%. Likewise, AIQ was beaten by such long-established corporations as Alphabet and Cisco Systems. During the period, Alphabet gained greater than 100%, while AIQ gained 47% and Cisco gained nearly 83%. (Disclosure: I don’t personally own AIQ, but I do have a small speculative position in an analogous ETF: the VistaShares Artificial Intelligence Supercycle ETF [AIS/Nasdaq].)
A more cautious approach to investing in AI
‘s approach to investors participating within the AI revolution is appropriately cautious. Keen investors might even see that latest ideas spark market excitement and big growth potential, the webinar warned, but may overlook the risks of an unexpectedly long wait for profitability or the incontrovertible fact that latest innovations could disrupt existing businesses. As for pure-play AI stocks and startups, some definitely promise great upside and a few will succeed, but history shows that “most will struggle or fail…as they always have with venture capital and junior stocks.”
Fortunately for conservative investors, there could also be no need for FOMO about missing out on SpaceX’s IPOs or (soon) AI startups like OpenAI or Anthropic: “The biggest gains from AI will come from investing in established companies that are already profitable and growing… They will benefit from developing AI and its applications for their customers; this is in addition to applying AI to streamline their operations.”
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All of that is a primary example of why experienced investors should adhere to the three core principles that TSI’s founder and chief investment officer has long advocated Patrick McKennaeOh: invest primarily in established, dividend-paying corporations; Diversification across the five major economic sectors (Manufacturing and Industrial; Resources and Commodities; Consumer; Financial and Utilities); and avoid stocks which can be within the broker/media highlight. The latter doubles for “AI startups without a history of solid sales, profits and preferably dividends.”
According to Wiseman, this approach has stood the test of time: “It has weathered and continues to weather AI volatility. While many of our AI stocks fell in step with the broader markets, in many cases they recovered the fastest, with some even rising while other ‘AI stocks’ fell on fears of an AI bubble.”
The AI topic in perspective
I even have definitely followed this philosophy myself. After all, Pat McKeough was once my personal financial advisor. That said, I delve into some lesser-known AI stocks whose pooled funds or discretionary investment management services don’t make it into the TSI review. However, more often than not I prefer to enter AI through specialized sector ETFs. Full disclosure: In addition to owning AIS, as mentioned above, I own a small position within the Roundhill Memory ETF (DRAM), which owns many of the booming memory stocks like Micron, SE Hynix, Samsung, Sandisk and lots of more.
For me, AI is only one sector and subsequently deserves no kind of weight than the five economic sectors mentioned by McKeough. Depending in your age and risk tolerance, it should perhaps form its own sixth sector. In that respect, it’s kind of much like my equally cautious approach to crypto investments, which in my view mustn’t exceed 5% of a complete portfolio. If so, I would like closer to 1% or 2%. But as I might if I were taking a flyer on a single AI startup, I keep the positions relatively small and would quickly sell half on each double to “play with the house money.”
