Artificial intelligence remains a standout technology of our time, a sentiment consistently echoed since 2022. In light of Nvidia’s recent impressive earnings report, it’s prudent to revisit the AI landscape, reassess previous investment picks, and provide an updated analysis.
The realm of AI continues to offer enticing investment opportunities. In an April 2023 column, the potential of AI was emphasized, projecting it to be a “multi-trillion dollar revolution.” At that time, prominent AI entities such as Nvidia, Alphabet, and potentially Microsoft were highlighted. However, caution was advised against smaller-cap AI stocks like C3.ai, Sprinklr, BigBear.ai, and SoundHound.ai – a stance that remains unchanged.
My belief in the AI revolution has remained steadfast since my initial investment in Nvidia and subsequent coverage for MarketWatch in 2016. While the desire to participate in this groundbreaking revolution persists, it now appears to be a crowded trade. It’s crucial to avoid the misconception that every tech company mentioning AI is a sound investment. Therefore, let’s delve into the fundamental trends driving the AI revolution and identify optimal long-term investment candidates.
Foremost, it’s evident that leading AI companies are fiercely competing to achieve artificial general intelligence (AGI). The frontrunners in this race are Meta Platforms and Tesla. These companies allocate substantial resources and assign their top talent to develop AGI for internal use, setting them apart from competitors.
A significant bottleneck in AI progress is the availability of computing power. Meta and Tesla are channeling their computing capabilities toward training proprietary AI models, setting them apart from Microsoft, Amazon, Oracle, and even Alphabet. These companies primarily utilize their compute resources for third-party AI training, generating immediate revenue. However, we predict that AGI will emerge as the most valuable technology, potentially causing cloud providers to regret not prioritizing resources for AGI exploration.
Expanding our analysis, we recognize other potential beneficiaries of the AI revolution. Autodesk, renowned for engineering software AutoCAD, possesses a vast dataset comprising plans, drawings, blueprints, and designs. Leveraging this dataset, Autodesk empowers a generative AI program, augmenting the efficiency and creativity of engineers and architects.
Cloudflare, with its expansive network of edge servers, stands as another cornerstone of our investment portfolio. These servers are strategically positioned to enhance the security and speed of AI inferencing globally, surpassing alternative solutions. Furthermore, we hold positions in Intel and Taiwan Semiconductor Manufacturing, recognizing these companies as the exclusive foundries capable of producing advanced chips crucial for AI advancement.
Nevertheless, it’s vital to acknowledge that the majority of AI, software, and semiconductor stocks currently face high demand. There may be opportunities to acquire these stocks at more favorable prices in the coming year, as purchasing during inflated valuations could hinder long-term investment success. Reflecting on historical examples such as the dot-com bubble, it’s clear that realizing returns after investing in high-valuation stocks may take an extended duration.
We remain steadfast in our commitment to holding long-term winners such as Nvidia, Alphabet, Meta Platforms, Taiwan Semiconductor, and Tesla, recognizing their pioneering roles in AI. Our optimism extends to the potential of Autodesk, Cloudflare, and Intel while remaining vigilant for the emergence of the next industry leaders in the evolving landscape of artificial intelligence, akin to Nvidia, Alphabet, Meta Platforms, or Tesla.
