4 minBusiness
AI may change the world, but it won’t change how you invest, says Dimensional founder
David Booth, founder of Dimensional Fund Advisors, argues that artificial intelligence will not alter how prices are set in public markets. He says market efficiency means AI cannot reliably help investors pick winning stocks, and warns against overconcentration in AI giants.
David Booth, founder and chairman of Dimensional Fund Advisors, argues that while artificial intelligence may represent a leap forward comparable to the invention of the refrigerator, it will not change how prices are set in stock and bond markets. In a commentary published by Fortune, Booth pushes back against speculation that AI will give investors an edge in picking winners, calling such expectations unrealistic given how public markets function.
Booth describes the stock market as the world’s largest information processing machine, where buyers and sellers continuously agree on trades because both sides believe the price is fair. He notes that this process, repeated millions of times daily, results in stocks settling at reasonable prices. Drawing on his graduate school experience at the University of Chicago, he recalls being part of the data revolution that helped the investing world understand market efficiency. With a century of data now available, US stocks have returned about 10 percent a year on average, and most professional stock pickers cannot consistently beat that benchmark.
To believe an AI agent can help an individual beat the market, Booth writes, one would have to believe it can know which stocks are mispriced and when. He argues that returns are inherently uncertain and that no model, human or artificial, knows what is coming. Even if AI improves the accumulation of information, that benefit would be shared by all market participants, meaning using AI to buy and sell stocks only adds anxiety and random noise for individual investors.
Booth also cautions against concentrating a portfolio in AI stocks. While most companies will likely use AI to improve efficiency and productivity, history suggests that targeting the companies expected to outperform from a technological revolution may lead to disappointment. He draws a parallel to the Dot Com boom, noting that of the top 20 telecom stocks in 1999, only one survived in its corporate structure twenty-five years later. Some of today’s market leaders will thrive, he says, but others will not, and entirely new winners will emerge that no one is currently discussing.
The solution, Booth argues, is not to gamble on individual winners but to own public markets through a broadly diversified portfolio that includes AI stocks and many others. Public markets finance thousands of competing ideas, moving capital toward what works while allowing failures to fade. With more than $1.2 trillion in expected capital spending in 2027 on everything from data centers to chips, the next big winner could be Big Tech or another sector entirely. By buying and holding a diversified portfolio, investors can pursue their financial goals without trying to guess which company will be the next big thing.
Booth emphasizes that open public markets have expanded the beneficiaries of innovation, allowing ordinary people, not just founders and venture capitalists, to enjoy long-term wealth creation without the risk of overconcentration. He remains hopeful that AI will help solve big problems and improve lives, but he concludes that it is unlikely to help anyone beat the market.
