Artificial intelligence is changing how investors assess long-term value. Its potential is clear, but so is the uncertainty around how quickly it will affect competition, pricing power and business models.
Alex Wright, portfolio manager of Fidelity Special Values PLC (LON:FSV), argues that this is becoming an important issue for investors. The key question is not whether AI will matter, but whether current share prices leave enough room for disruption risk. In some sectors, especially where companies have been valued on the strength of long-term market position, that margin for error looks thin. If AI lowers barriers to entry or weakens established advantages, even strong businesses may struggle to justify premium ratings.
That is starting to create a wider spread of opportunities across the market. Some companies remain priced for confidence, while others have been marked down heavily on the fear of future disruption. For value investors, that gap matters. When sentiment moves faster than fundamentals, mispricing can develop.
In this environment, lower-rated businesses with solid balance sheets and adaptable operating models may offer a more attractive risk-reward balance than companies priced on distant certainty. Investors do not need a perfect view of what an industry will look like in ten years if they can buy businesses where expectations are already low and downside is more clearly reflected in the share price.
There are also areas where AI-related investment could support earnings more than the market currently recognises. Companies linked to data centre expansion, electricity demand and supporting infrastructure may benefit from rising capital spending without trading on the same elevated expectations seen elsewhere. That offers investors exposure to the AI theme without paying peak valuations for it.
The same logic applies to sectors where market concern may have gone too far. Staffing businesses are one example. They face recurring fears about disintermediation, and AI has added to that pressure. But recent weakness appears to reflect cyclical softness as much as structural change. Hiring markets have been subdued, corporate confidence has been restrained and employee movement has remained below normal levels. Yet valuations in some cases suggest a much deeper and more permanent problem. If trading conditions improve, that leaves scope for a reassessment.
Wealth management shows a similar pattern. The sector has already absorbed years of concern about digital competition and lower-cost advice models. Those fears have not led to a broad collapse in industry economics. More recent selling linked to AI risk may again be treating the sector too broadly, without enough distinction between businesses that are genuinely vulnerable and those that remain more resilient. Where the market applies a blanket discount, selective opportunities can emerge.
Fidelity Special Values PLC (LON:FSV) aims to seek out underappreciated companies primarily listed in the UK and is an actively managed contrarian Investment Trust that thrives on volatility and uncertainty.
