AI fund manager warns against major AI stock investments

Daniel Mahr, a money manager, has been using a machine-learning model to invest in stocks for years. This model has recently been signaling caution about investing in leading tech companies tied to the AI boom, like Nvidia. Despite a drop in tech stocks, Mahr warns that they are still expensive and volatile. Mahr manages the Federated Hermes MDT All Cap Core Fund, which has outperformed the market, showing an annual return of 26% over the last five years. This is notable considering many funds struggle in a challenging market. While the fund is down 1.4% this year, it has fared better than many competitors. His investment approach stands out because it uses decision tree analysis to evaluate stocks. This method analyzes historical data to predict future performance based on various factors, adapting to new information as needed. Mahr’s model now considers 16 factors, allowing for a tailored analysis of different industries. While many AI strategies follow a fixed formula, Mahr believes his flexible approach leads to more consistent performance. He aims to avoid risky bets and instead focuses on a diversified portfolio that can handle different market conditions. Mahr's caution extends to current economic uncertainties, preferring investments that are resilient regardless of political shifts.