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While investor enthusiasm for artificial intelligence (AI) continues to drive markets, technology analyst Beth Kindig has issued a specific warning: a bubble is forming, but it’s concentrated primarily in the AI software sector.
In a recent interview, the CEO and Lead Tech Analyst at I/O Fund advised that the real value lies not in speculative future promises but in companies that are already capitalizing on the industry’s massive infrastructure build-out.
When asked by interviewer Maggie Lake if any part of the AI universe felt “bubbly,” Kindig's response was an unequivocal “Yes, absolutely.” She quickly clarified where she sees the risk.
“AI software is really in R&D stage,” Kindig explained. “That’s where I think the bubble is primarily at [the] software layer.”
Kindig drew a sharp distinction between these software firms and the “picks and shovel” hardware plays that are essential to the AI revolution.
She pointed to companies like Nvidia Corp. (NASDAQ:NVDA) and its many suppliers as key beneficiaries that are “downwind from massive capex spend” from hyperscalers and other enterprise clients.
According to Kindig, these hardware-focused companies are already profiting from the tangible demand for computing power, making them a more fundamentally sound investment.
“Distinguishing that is key,” she emphasized, outlining her own investment thesis. “I really try hard to not move into a position unless they are participating right now.”
Kindig also cautioned investors to be wary of market noise from traders who chase momentum without scrutinizing a company’s actual role or profitability within the AI ecosystem.
She noted that this pattern of speculative excitement is not unique to AI, drawing parallels to the early days of previous transformative technologies like the internet, mobile, and cloud, where many companies failed to live up to their initial hype.
Here’s a list of AI-linked exchange-traded funds that investors can consider.
| ETF Name | YTD Performance | One Year Performance |
| iShares US Technology ETF (NYSE:IYW) | 14.60% | 31.15% |
| Fidelity MSCI Information Technology Index ETF (NYSE:FTEC) | 12.46% | 29.57% |
| First Trust Dow Jones Internet Index Fund (NYSE:FDN) | 15.18% | 43.97% |
| iShares Expanded Tech Sector ETF (NYSE:IGM) | 16.82% | 35.92% |
| iShares Global Tech ETF (NYSE:IXN) | 13.03% | 25.21% |
| Defiance Quantum ETF (NASDAQ:QTUM) | 15.60% | 64.32% |
| Roundhill Magnificent Seven ETF (BATS:MAGS) | 13.02% | 42.95% |
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, rose in premarket on Monday. The SPY was up 0.14% at $648.12, while the QQQ advanced 0.31% to $577.86, according to Benzinga Pro data.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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