Artificial intelligence has quickly become one of the biggest stories in technology—and in financial markets. While most of us experience AI through a chatbot or other application, there is an enormous network of companies and infrastructure working behind the scenes.
For investors, understanding this bigger picture can help put both the opportunities and the headlines surrounding AI into perspective.
When we hear “AI investing,” it’s easy to think about a handful of well-known technology companies. In reality, the AI value chain extends much further.
Semiconductors and memory chips provide the computing power needed to train and operate AI models. Those chips run inside massive data centers requiring electricity, cooling, security, and other infrastructure. Software companies then turn these capabilities into tools that businesses and consumers can use.
Chart takeaway: Data center construction spending has accelerated dramatically since the introduction of ChatGPT in late 2022 and now exceeds other office construction spending.
That’s one of the biggest questions facing investors. Hundreds of billions of dollars are being invested in AI infrastructure, and strong demand for computing power has benefited many companies along the AI supply chain. But technology is also becoming more efficient, making future demand difficult to predict.
This uncertainty helps explain why AI-related stocks can experience significant ups and downs.
Chart takeaway: Large technology companies have produced strong returns, but the journey has included considerable volatility.
History also reminds us that transformative technologies can take time to reach their full potential. The internet ultimately reshaped the global economy, but the excitement surrounding internet stocks in the late 1990s took decades to fully play out.
Investor enthusiasm has also pushed technology valuations higher. The Information Technology sector currently trades at 21.4 times earnings, elevated compared with its own history and the broader market. Those valuations reflect strong expectations for future growth—but high expectations can also increase risk if results disappoint.
Chart takeaway: Technology valuations reflect considerable optimism, while opportunities for earnings growth exist across other areas of the market as well.
AI has the potential to transform businesses and the economy, but no one can know today exactly which companies will ultimately be the biggest winners.
For long-term investors, that’s an important reminder of why diversification matters. Rather than trying to predict the next AI winner, a balanced portfolio can participate in innovation while spreading risk across companies, sectors, and other investments.
AI may change dramatically in the years ahead. Our focus remains the same: maintaining perspective, staying diversified, and keeping your portfolio aligned with your long-term financial goals.
References:
U.S. Census Bureau, Construction Spending.
Magnificent 7 data as of July 17, 2026.
Clearnomics research and LSEG data as of July 17, 2026
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Important Disclosures
The views expressed represent the opinions of Mendel Money Management, Inc. as of the date noted and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial or legal advice or service to any person. The information contained has been compiled from sources deemed reliable, yet accuracy is not guaranteed.
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