How "can't miss" investments can lead to huge losses

Picture this. A brand new technology is reshaping the world. Everyone can see it. The newspapers are full of it. Your neighbour just told you he's putting his savings into it. The logic feels airtight: this is obviously the future, so investing in it is obviously a good idea, right?

In my opinion, this is one of the most dangerous theories in investing.

The history of financial markets is littered with industries that changed the world, yet failed to survive. For investors, investing in the “next big thing” has not always been profitable. Being right about where the world is going and being right about where your money should go are two completely different skills.

Right now, with Artificial Intelligence (AI) consuming every headline and every investment conversation, this history is worth revisiting.

US auto industry: More than 1,000 entrants, 3 survivors

In the early 1900s, the US auto industry was “a sure thing”. Vehicle ownership in the US grew from just 8,000 cars in 1900 to over 26 million by 1930. But transformation at the sector level did not necessarily translate into returns at the investor level — not unless you picked the right company.

Henry Ford changed manufacturing with the assembly line. General Motors, under Alfred Sloan, invented the idea of annual model changes and tiered pricing. Chrysler bought the Dodge brand and built a #3 position by 1930. These three had the capital, the distribution, and the management to outlast everyone else.

The others — Hudson, Packard, Studebaker, Nash, and hundreds more — eventually folded, merged, or were absorbed. Packard, which was once the car of American presidents, went bankrupt in 1958. Studebaker, which had been around since the horse-and-buggy era, shut its US operations in 1963.

The lesson: the industry won, but most investors did not.

The internet boom: $5 trillion wiped out

Fast forward to the late 1990s. The internet was clearly going to change everything. It was so obvious. Between 1995 and March 2000, the NASDAQ rose by 400%, with P/E ratios on tech stocks reaching 200x. In 1999 alone, there were 457 IPOs, most of them internet companies.

Then the bubble burst. The NASDAQ fell more than 75% between March 2000 and October 2002. Over $5 trillion in market value was erased.

Pets.com burned through its investors' money and shut down nine months after its IPO. Webvan, an online grocery business, went bankrupt after raising $375 million in its IPO and $396 million in venture capital. Boo.com, a fashion retailer, lost $135 million in 18 months.

The internet itself, of course, survived and thrived. Amazon — which saw its stock fall from around $100 to $7 during the crash — eventually became one of the most valuable companies in history. Looking at Amazon now and saying "I should have invested in the internet in 1999" is like looking at a lottery winner and saying "I should have bought a ticket." It ignores the 99.9% of tickets that are in the trash.

The point is, an investor who had spread their bets across "internet companies" in 1999 would have had to be extraordinarily lucky to have landed on the few survivors.

India's telecom story: 20+ players, 3 survivors

India in the early 2000s was a telecom investor's dream. A billion people, rising incomes, falling handset prices. The New Telecom Policy of 1999 had declared the sector of "vital importance to the entire economy."

More than 20 private operators rushed in — Vodafone, Telenor (Norway), Maxis (Malaysia), MTS (Russia), Aircel, Videocon Telecom, Tata Docomo, Reliance Communications, and many more. Each raised enormous capital. Each had a credible story.

When Reliance Jio entered in 2016 — offering free voice calls and near-free data — the price war began in earnest. Smaller players died first. Aircel shut down. Reliance Communications, once a market leader, filed for bankruptcy. Tata Teleservices, Telenor India, and MTS all sold out or shut down.

As of March 2026, over 15 mobile operators have ceased operations in India. The market today has three players: Reliance Jio and Airtel dominate, while Vodafone Idea is currently in survival mode.

The story was right. The sector grew spectacularly. But most of the companies in it did not.

AI today: Déjà vu?

Which brings us to the present.

The AI sector right now looks strikingly similar to each of these moments. The technology is real and transformative. The growth numbers are extraordinary. And the competition is fierce, well-funded, and accelerating.

What actually works: The boring way to build wealth

While investors in telecom, internet, and early auto companies were riding exciting waves — and often getting wiped out — something quieter is always happening in the background.

None of this is a recommendation to avoid new industries entirely. Some of the greatest wealth in history has been created by those who correctly identified both the winning trend and the winning company — and then held on through the volatility.

But that requires something most retail investors do not have the time or tools to do: rigorous, ongoing diligence. You need to understand the technology, the competitive dynamics, the unit economics and the management. You need to track it continuously, not just buy and forget.

If you are not doing that — and most of us are not — then chasing the hottest sector of the moment is closer to gambling than investing.

Here are a few potential alternatives:

Suppose that you believe in a sector's future but don't have time to pick winners, pick diversified mutual funds or ETFs that spread the risk across many players. Some will fail; the ones that survive will carry your returns.

For an investor looking to build wealth quietly and reliably, look at businesses that are dull, essential, and competitively entrenched. The companies that sell you soap, medicines, and electricity tend not to make headlines, but can deliver steady returns. If you want to invest actively in emerging trends, treat it as a small part of your portfolio. The money you put into high-conviction trend plays should be the money you can afford to lose entirely.

The first-mover disadvantage

In tech, the first mover often pays the "pioneer tax." It spends all the money on R&D and market education, only for a second mover to come in and do it cheaper/better once the path is cleared. For instance, AltaVista/Yahoo paved the way, but Google won. MySpace paved the way, but Facebook won.

Before you go

The automobile was not a bad bet. The internet was not a bad bet. AI may not be a bad bet. But "the sector will win" and "your money will grow" are two sentences that history has repeatedly refused to treat as the same thing.

The next big thing has a long history of making early investors very nervous. The boring things have a long history of making investors very rich.