I get asked this question a lot – more specifically about Tesla and Nvidia, but in general about AI and electrical vehicles.

The reason I haven’t invested heavily in these stocks is two-fold:

1. Too much hype
2. New technologies are usually not good investments

The first one is simple to explain. The famous Buffett quote “greedy when others are fearful, fearful when others are greedy” applies. Hyped up industries and stocks almost never make people rich.

The most important factor in any investment is the price you pay – even the worst company or industry in the world can be a good investment if it’s cheap enough. The goal is to buy something for much less than it’s worth, and when something has hype behind it that’s almost impossible to do.

As a result, anything “new” or “trendy” rarely clicks on my radar.

The second reason is a little more complex.

You might be thinking – new technologies are bad investments? How does that make sense? Surely new technology is where the money is?

History tells us that’s not true.

Over our lifetimes many new technologies have changed the world – railroads, telephone, cars, planes, internet – but almost none of these have made investors wealthy. Most have done the opposite.

If you invested in airlines, you’ve probably underperformed the index. If you invested in phone/mobile companies, you’ve probably underperformed the index. If you invested in the internet, you probably lost everything back in 2000.

Cars is probably the best example. No other technology has changed people’s lives as much as the car in the last 100 years, except for maybe the internet. It was the sole catalyst for building the massive interstate highway system in America. Almost every family in the western world now owns a car and uses it daily. But investing in car companies has probably been the worst investment of the last 100 years.

Since the invention of the car, there has been over 2,000 car companies in the USA. Many of them never managed to bring a car to market, despite taking millions (billions) in investor funds. And of those 2,000 car companies, 1,998 of them, or 99.9%, have gone bankrupt. That includes the big guns that nobody ever thought would fail, like General Motors, Pontiac and Chrysler. Here’s the proof.

Only two car companies in America haven’t gone bankrupt. Ford and Tesla.

As for Ford, if you invested in the IPO you would have underperformed the market by about 2,000%:

Meaning the only car company that has actually been a good investment long-term is Tesla, which was listed about 100 years after the initial car “hype” (and doesn’t even make traditional cars).

Nobody would have guessed this in a million years. Think about when the car was invented, back around 1900. It was so revolutionary, people would have thought this is definitely the future. I need to invest in this now! (sound familiar?)

Yet you could have analysed every car stock, invested in your ten favourite, and every single one would have gone bankrupt (Ford wasn’t listed until 1956).

We are in the same position now with AI.

Already AI models have been put out by all the big tech cos – Google has Gemini, Microsoft has ChatGPT, Meta has Meta AI, X (Twitter) has Grok, Alibaba has Qwen, Samsung has Galaxy AI.

Which one is going to win?

My guess is none of them.

Think back to the internet boom of the mid 90s. Search was the obvious big business back then, and you had Yahoo, AOL, Altavista, Netscape and countless others.

Who won?

None of them.

Google became the search behemoth, but it wasn’t listed until a decade later, in 2004.

In fact, almost every internet company people were investing in during the dot-com boom ended up being worth nothing.

If we look at airlines, we’d have the same result. No investors have gotten rich off early investment in airlines.

The lesson is that investing in “the next big thing” rarely results in fortunes, because the market is too hard to predict, stock prices are all inflated due to hype, and most importantly the “good” companies usually don’t reveal themselves (or even exist) until the market has matured. Because as with every other industry, the “good” companies are the ones that make money.

Think about AI right now – most companies are scrambling to make AI models, but how are they going to make money from them? They still don’t know. Think about Chat GPT. All of us have used it. How much money have we spent on it? Nothing. You can pay for a premium version, but have you? I haven’t. Neither has anyone else I know. This was a similar problem with internet investments back in 2000. Everyone knew the internet would be great. Nobody knew how to make money from it.

Investing in hype almost never makes you money. To make money in investing, you need to go back to basics – investing in reliable cashflows, moats, and robust balance sheets. Find great CEOs building companies that are being undervalued by the market.

This exactly what we do in the @moneybren portfolio every day – finding low-risk cash-flowing investments that will continue to pay us on autopilot for many years into the future.

Want to learn more? My course Simple Stocks will teach you to build your own thriving stock portfolio in just a few minutes a day. Join hundreds of other students here!