INSIGHTS

June 10, 2026

Manager Perspective

The AI Boom: The Right Question for Investors

For much of the last two decades, investors and economists worried that the US economy was slowing structurally. Productivity growth, the engine that ultimately drives wages, profits, and long-term market returns, appeared stuck in a low gear.

That may now be changing.

A recent article from The Economist argues that the United States is experiencing a meaningful acceleration in productivity growth, with output per worker rising at roughly 2% annually over the past five years. That is a substantial improvement compared with the sluggish post-financial-crisis era.

C. Angus Schaal, CFP^®

Senior Managing Director

Many investors today are asking whether the AI boom represents a bubble. While that question generates headlines, it may not be the most useful question for long-term investors.

History suggests that transformative technologies often follow a familiar pattern. Railroads, electricity, automobiles, the internet, and smartphones all produced periods of extraordinary investment, enthusiasm, and, in some cases, speculation. Some companies failed, some valuations proved excessive, but the underlying technologies permanently changed the economy.

Artificial intelligence appears likely to follow a similar path.

The challenge for investors is not determining the exact day enthusiasm peaks. Few investors successfully identify market tops in real time. The more important task is distinguishing between a technology that creates lasting economic value and one that does not.

Today, AI is already reshaping software, semiconductors, cloud computing, data centers, cybersecurity, industrial automation, and healthcare. Corporate investment in AI infrastructure continues to grow, and many businesses are only beginning to incorporate these technologies into their operations.

At the same time, periods of rapid innovation often create valuation excesses. Some companies will ultimately justify their valuations. Others will not. This has been true throughout every major technological revolution.

For that reason, we believe investors should avoid two common mistakes:

First, becoming so fearful of a potential bubble that they avoid the opportunity entirely.

Second, abandoning diversification and risk management in pursuit of the hottest stocks or newest themes.

Our view remains that the most prudent approach is to participate in the AI-driven transformation of the economy while maintaining a disciplined portfolio structure. This means owning businesses with durable competitive advantages, strong balance sheets, growing cash flows, and reasonable long-term prospects, rather than attempting to speculate on every new development.

One of the reasons we have discussed technology exposure with many clients recently is that a significant portion of global earnings growth is currently being generated by companies involved in semiconductors, digital infrastructure, software, cloud computing, and artificial intelligence. A portfolio that is materially underweight in these areas may face challenges keeping pace with long-term economic and earnings growth.

That does not mean every AI-related company will be successful. It does mean that ignoring one of the most important technological shifts in decades carries its own risks.

Ultimately, we believe the question is not whether AI enthusiasm eventually cools. Every major investment cycle eventually does.

The more important question is whether artificial intelligence will continue to create economic value, productivity gains, and earnings growth over the next decade.

At this stage, the evidence suggests the answer is yes.

As portfolio managers, our objective is not to predict the exact timing of a future peak. Our objective is to ensure client portfolios are positioned to participate in long-term opportunities while remaining diversified enough to withstand whatever surprises the future may bring.

Disclosures:

Tandem Wealth Advisors LLC (“Tandem”) is an SEC-registered investment adviser.

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