Artificial Intelligence (AI) is one of the most transformative technologies of our time. It is already reshaping industries, from finance to healthcare, and promises long-term productivity gains at the global level. However, while AI will contribute meaningfully to economic growth, markets may already be pricing in more than is realistic in the near term.
Long-Term Gains from AI
Most credible studies (PwC, McKinsey, Goldman Sachs) suggest AI could add between 0.5–1 percentage point to annual global GDP growth once adoption matures.
That may translate to the global economy being around 20–30% larger over a 20-year horizon compared to a world without it.
In absolute terms, this equals tens of trillions of dollars in additional value creation.
Global GDP Projection with AI Boost (2025–2045)
Baseline 3% growth vs AI-boosted 4% growth
Market Valuations and Risks
Despite the long-term potential, equity markets—particularly in the United States—have already surged in anticipation of AI-driven growth.
- Many technology companies are trading at elevated valuations, with investors pricing in decades of gains upfront.
- History shows that in past technology cycles, such as the dot-com boom of the 1990s, stock markets surged before productivity gains were fully realised.
- While productivity eventually caught up, valuations corrected sharply in the interim.
Dot-Com Era: Stock Market vs Productivity (1990–2010)
Markets overshot before productivity was fully realised
Strategic Positioning for Investors
The message is not to avoid investing in AI, but rather to do so cautiously and strategically.
AI will undoubtedly transform industries and provide attractive opportunities, but the current market momentum suggests that selectivity and discipline are required.
Investors should focus on:
- Companies with strong balance sheets
- Clear adoption pathways
- Real-world applications of AI
…while avoiding overexposure to speculative hype.
Advisor’s Perspective
In my view, the market is currently “hot.”
While AI’s contribution could lift long-term returns by 20–30%, equity markets have already factored in far more.
That doesn’t mean avoiding AI—rather, it calls for measured exposure, diversification, and awareness of valuation risks.
The strategy is to participate in the AI-driven future without being overextended in the present hype.
Conclusion
AI will add significant long-term value to the global economy, but investors should balance optimism with caution.
Just as with past technology revolutions, the benefits are real, but they take time to materialise. Strategic, disciplined investing will capture the upside while mitigating risks.
Any discussion in this post does not take into account your objectives, financial situation or needs. Before acting on it, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs.
For tailored support, speak with a licensed professional about your financial planning or financial services needs today.