Artificial intelligence is the talk of the market and technology users around the world, and for good reason. Newly released AI models have been incredibly impressive, if not totally accurate, in their early debuts. Whether it's chat products or custom images, AI seems to be everywhere. 

As investors, this creates an opportunity to find new growth stocks. But there's also reason to be cautious with new AI investments today. 

Green flag: Adoption is off the charts

Right now, any company with even the least bit of exposure to artificial intelligence is getting a look from investors. And that makes sense. Unlike new tech paradigms like virtual reality, crypto, and the metaverse, AI adoption is off the charts. In only two months, OpenAI's ChatGPT notched 100 million active users, and Microsoft recently unveiled an AI-powered Bing search engine. 

New companies are forming on the back of this success, too, from small apps to additions to major tech products. And it seems like everyone is pouring both money and attention into AI. 

It's hard to overlook this growth and investors might be wanting to feast on any company with exposure to AI. But a more discerning look at how companies will make money with this technology is required. 

Red flag: There's no clear business model...yet

It's easy to say that certain companies will dominate artificial intelligence. NVIDIA, Microsoft, Tesla, and are just a few that investors think are clear leaders. But so far, a lot of the AI use cases are just toys. For example, I doubt Bing's AI-powered search will upend Alphabet's Google anytime soon given the mistakes it makes. 

There's no clear business model for AI yet, except in cases where it helps existing businesses. ChatGPT isn't a fully fleshed-out business, Midjourney is interesting but still limited inside Discord, and many AI apps are already going boom and bust. Even on the chip side, it's not clear if AI will run on the cloud or on the device, something we know Apple is working to implement in its custom-made chips. 

Technology takes time to solidify business models, especially in new technology paradigms. Remember that in 1999, Cisco, AOL, Dell Computer, Nokia, Ericsson, and Yahoo! were seen as clear winners in the internet age. That basket of stocks would have underperformed the market by a very wide margin over the next two decades.

The same may be the case for AI. Early leaders may not hold a lead if they don't find a way to make money. I would look at the industry with a healthy level of skepticism. 

Don't bet the farm on AI

While there's obviously a lot of potential for artificial intelligence in a lot of areas, investors should be discerning with their money. Companies that talk about AI may not necessarily be the winners long-term. And until I know how companies are going to make money using this technology, I will be skeptical of anyone using AI as a buzzword. 

This is absolutely one of the biggest technological opportunities we've seen since the iPhone, so investors should pay attention. But I would rather be late in buying an industry leader than bet on the wrong company in AI. As happened with the internet and smartphones, the future winners may not be the seemingly obvious AI companies we hear about today.