“Don't fall into the trap of thinking that every tech company that mentions AI belongs in your portfolio. “
AI is one of the most revolutionary technologies of our time, as I've been saying since 2022. Looking at NVDA from Nvidia,
Last month's massive earnings results, it's worth revisiting the AI trend, reviewing our previous picks and updating our analysis.
There are still great opportunities to invest in the potential of artificial intelligence. In an April 2023 column, I noted that AI would be a “multi-trillion-dollar revolution.” At the time, I noticed that some of the top AI companies included Nvidia, Alphabet GOOG, and…
And maybe Microsoft MSFT,
She also cautioned against owning small-cap AI stocks, including C3.ai AI,
sprinkler cxm cxm,
BigBear.ai BBAI BBAI,
and SoundHound.ai Soon Soon,
— and still does.
I've been a believer in the AI revolution since I started buying Nvidia and wrote about it for MarketWatch in 2016. We want to continue investing in this amazing revolution, but right now it feels like a crowded trade. We don't want to fall into the trap of thinking that every tech company that mentions AI is a good investment. So let's review the key fundamental trends that are enabling the AI revolution and find the best companies to invest in for the long term.
First, it is clear that the top AI companies are all racing to be the first to achieve Artificial General Intelligence (AGI). Most Likely Winners: Meta Platforms META,
Or TSLA,
Both companies are spending huge sums of money and giving their best and brightest employees the task of building AGI for their internal use.
The current limiting factor for artificial intelligence is computing power. Meta and Tesla devote their computational power to training their AI models. This is different from Microsoft, Amazon.com and AMZN
oracle oracle,
Even Alphabet, which sells its valuable computing resources to third parties for AI training. This creates near-term revenue for these companies, but we believe that AGI will be the most valuable technology ever created and cloud providers will regret not devoting more of their resources to being the first to discover AGI.
Cast a wide net
We've come across a few other companies that could be major beneficiaries of the AI revolution. We love Autodesk ADSK,
(Maker of the engineering software AutoCAD. Its unique and massive data set consists of plans, drawings, diagrams and designs that the company can use for a generative artificial intelligence program that will increase the productivity and creativity of engineers and architects.
We also have Cloudflare NET,
Because its network of edge servers will be used to run the inference part of the AI around the world more securely and with much lower latency than alternatives. We also own Intel INTC,
and Taiwan Semiconductor Manufacturing (TSM),
Because we believe that these companies will be the only companies on the planet that have foundries capable of building the advanced chips needed to power AI.
However, most AI, software and semiconductor stocks are a crowded trade at the moment; Maybe there will be an opportunity to buy at lower prices next year. One of the keys to long-term investing is not to overpay for stocks when they get high valuations. Remember that during the dot-com bubble, major companies like Microsoft and Intel reached truly astronomical valuations on the stock market, and it took many years for investors to earn a return if they bought at the 2000 highs.
We will continue to hold big long-term winners including Nvidia, Alphabet, Meta Platforms, Taiwan Semiconductor and Tesla, as these companies are at the forefront of AI. We're excited about the prospects for Autodesk, Cloudfare, and Intel. We'll also be on the lookout for the next Nvidia, Alphabet, Meta, or Tesla platforms.
Disclosure: Willard and/or the 10,000 Day Hedge Fund are net long of META, GOOG, AMZN, TSLA, INTC, TSM, ADSK, NET, NVDA and net AI. Situations can change at any time and without warning.
more: Look out, Super Micro: Dell is establishing itself as an AI game, too
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