AI has dominated economic headlines for several years now, but investing in the transformative potential of AI can still seem a murky area to investors who want to catch the wave of opportunities evoked by those headlines. 

This can be especially true for individual investors, whose plans for retirement and other life goals could be seriously derailed in the event of a “bubble” or volatile returns that do not correlate with their needs and priorities. 

Consider the following key guiding principles that have served well when selecting investments.

First, it is helpful to think of AI, and the large language models that are often emblematic of AI, as one of multiple innovative technologies in development. There has been plenty of exuberance, concern and noise for investors to navigate this year, from the Initial Public Offering of SpaceX, to military events in Iran, to the ever-shifting landscape of AI tools themselves. 

We can characterize this as huge interest in strongly innovative technologies, broadly conceived. Increased power needs and more developed delivery of electrical power are enmeshed in so many technological developments that it seems prudent to pursue investments in the technologies and their power needs in concert. 

One strategy is leaning toward these needs as “picks and shovels” businesses as they will benefit and grow from building this enlarged infrastructure. 

As an indirect but helpful way to monitor growth and shifts in this area is to monitor data in industry especially. This means reviewing economic data regularly and doing a deep dive when intriguing results turn up. 

For example, this past April, the Industrial Production number, an economic indicator that measures changes in production volume for the manufacturing and electric and gas utility sectors and more, rose 0.7% in April, following a drop in March of 0.3%. 

While the services component of the U.S. economy has been the larger component for decades now, there are opportunities in manufacturing, particularly in the larger context of power and reshoring production to the United States. 

The volatility of these numbers could prompt a look into the components that underlie the overall number. The report on the Industrial Production number comes from one of a number of ongoing economic studies by the Federal Reserve, which published the most recent report here: federalreserve.gov/releases/g17/current/default.htm

Mining and utilities have each been areas of focus in recent years so remain vigilant about when the best investments might move from the earlier stages of industrial production to more finished stages. The report says that “capacity utilization moved up to 76.1 percent, a rate that is 3.3 percentage points below its long-run (1972–2025) average.” That might seem discouraging, but it is also 1.3% above a year ago, and quite a rebound from its 2009 low of 66.5%.

Analysis of this type can open up ways to pursue investments that help diversify a portfolio but also capture some tremendous opportunities. 

Michelle A. Clary is the founder, CEO and Senior Wealth Advisor at Piton Wealth, which has offices in Kennewick and Montana.