There was a time when people could earn a living by sawing blocks of frozen river ice, transporting them to cities, storing them in straw, and selling them to households that needed to keep food cold.
Today, we have Bluetooth refrigerators.
That transformation is an example of what I call human ingenuity: the collective ability of people around the world to solve problems and make the future better.
Artificial intelligence may represent an “ice block to refrigerator” level of advancement. AI already helps people complete everyday tasks more efficiently, from creating workout routines to planning vacations. Over time, it could also contribute to breakthroughs in health care, transportation, and the nature of work.
But I am confident that AI will not change how prices are set in stock and bond markets.
How AI could affect investing
I constantly hear speculation about AI’s impact on the financial industry. Can AI pick stocks? Should investors put all their money into the stocks of AI giants? Will AI change everything we know about financial markets?
To me, these questions highlight the importance of understanding how public markets work.
Think of the stock market as the world’s largest information-processing machine. Buyers and sellers come together and agree to trades, and both sides must believe the price is fair. If stock prices are too high, people will not buy because they want a fair return. If prices are too low, people will not sell. Repeated millions of times each day, this process causes stocks to settle at prices that generally reflect available information.
During my graduate-school years at the University of Chicago, I was fortunate to take part in the data revolution that helped the investing world understand that markets were efficient.
Before 1960, no one knew what a market-wide portfolio typically returned. Now, with 100 years of data, we know that U.S. stocks have returned about 10% a year on average over the past century. Most professional stock pickers cannot compete with the market. There is no compelling evidence that money managers can reliably identify winning stocks over time.
Why AI is unlikely to beat the market
A better assumption is that the stock market reflects all available information faster than any individual or model ever could. To believe an AI agent can help you beat the market, you would have to believe it can consistently identify which stocks are mispriced and when.
But investment returns are uncertain, and no one—not even an AI agent—knows what is coming. It is unrealistic to expect one particular AI model to systematically outperform its competitors over the long term.
Even if AI makes information gathering more efficient, that advantage would be available to all market participants. Using AI to buy and sell stocks may therefore add anxiety and random noise to individual investors’ decisions.
Similarly, concentrating an entire portfolio in “AI stocks” could lead to disappointment.
Most companies will probably use AI to improve efficiency and increase productivity, which makes me optimistic about the future. However, history suggests that targeting the companies expected to benefit most from an AI revolution may not produce a successful investing experience.
The risk of betting on the next big winner
Many investors have compared today’s environment with the telecom companies that built the internet’s infrastructure during the dot-com boom. Consider the leading telecom stocks in 1999, when Lucent Technologies and Nextel Communications led the pack. Twenty-five years later, only one of the top 20 stocks had survived in the same corporate structure.
Some of today’s market leaders will thrive, while others will not. Entirely new winners will emerge that few people are discussing today. Google, for example, did not go public until 2004. And who would have guessed that Levi Strauss would become one of the major winners from the Gold Rush?
No one knows which companies will win. So why make that bet? Trying to select a major winner could turn you into a major loser.
The good news is that investors do not have to gamble on individual winners to build wealth. A broadly diversified portfolio can include AI stocks along with many other companies, allowing investors to participate in whatever the future becomes instead of betting on what they think it will become.
Diversification and the future of AI investing
Public markets help finance thousands of competing ideas. Some will result in spectacular failures, while capital moves rapidly toward what works. With more than $1.2 trillion in expected capital spending in 2027 on projects ranging from data centers to chips, the beneficiaries could be Big Tech—or an entirely different sector.
By buying and holding a diversified portfolio of stocks, investors can pursue their financial goals without spending their time trying to predict which company will become the next big thing. They will own it regardless.
This investing mindset helps people manage uncertainty about the future rather than remain anxious about it.
Open public markets have expanded the number of people who can benefit from innovation. Ordinary investors—not just founders, venture capitalists, and insiders—can participate in long-term wealth creation and benefit on aggregate without taking the risk of excessive concentration.
I am hopeful that AI will help people solve major problems and improve millions of lives. It may even produce a better refrigerator. But it is unlikely to help investors beat the market.
David Booth is Founder and Chairman of Dimensional Fund Advisors. He is the author of Stay Calm: Learn to Embrace Uncertainty in Investing and Life.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
