👑5 Quality AI Businesses
Who will be the AI winners? 🧠
Hi partner! 👋
Today we will discuss 5 quality businesses benefitting from AI.
The large AI winners have so far been the companies that deliver the hardware, software, and infrastructure to be able to run large AI Models.
Nvidia is up 180% in the last year alone, far outpacing the S&P 500 and Nasdaq ✅
Super Micro Computer is up +140% in the last year, despite being down -47% from its ATH ✅
In case you missed our recent articles:
Artificial Intelligence market to reach $826.73B by 2030
Statista expects the AI market to expand from $184.04 billion in 2024 to $826.73 billion in 2030.
That is a 4.5X in a little over 6 years (!).
Multi-billion dollar companies will be built on this secular trend.
Similarly, Marketsandmarkets predict that the AI market will grow to $1,339.1 billion by 2039.
A compounded annual growth rate of 35.7% (!). ✅
The prediction is that the main growth will come from emerging markets, such as India and China.
How does one get exposure to this massive trend?
One option is to Buy the lot
Invesco ETF AI and Next Gen Software is one way of getting exposure to AI-related businesses.
The ETF has been a consistent performer since its inception in 2014 with a CAGR of 14.3%.
The top 20 holdings consist of Meta Platforms, Alphabet, AMD, Nvidia, and Adobe.
These are not necessarily AI pure-plays, but businesses that are positioned to benefit from AI.
3 Interesting facts from Stanford University’s AI report:
AI beats humans on some tasks, but not on all: “…it trails behind on more complex tasks like competition-level mathematics, visual commonsense reasoning and planning” (Thank god).
Creating AI models is getting way more expensive: “The training costs of state-of-the-art AI models have reached unprecedented levels” - GPT 4 used an estimated $78 million worth of computing to train for example.
AI makes workers more productive and leads to higher-quality work: “…AI enables workers to complete tasks more quickly and to improve the quality of their output.”
Source: Stanford University
Extensive over of the AI Sector:
The AI industry can be divided into multiple categories:
Hardware/devices
Network
Software
Security
Platforms
Services
Cloud Infrastructure
Here is a comprehensive overview of the players in different segments:
Artificial intelligence as a service
This business model is likely to be a great revenue stream for businesses with attractive software that are already utilizing the Software as a Service (SaaS) model.
The obvious winners here are the cloud infrastructure builders, Amazon (AWS), Microsoft (Azure), and Alphabet (Google Cloud). However, SaaS businesses like Intuit, Adobe, and Salesforce are also likely to benefit.
Smaller companies can also utilize this model. We see many start-ups creating businesses built on top of AI engines like OpenAI’s:
Let’s take a look at 5 businesses benefitting from AI🏰
Before we get started, I want to underline, that some of these businesses (although high quality) are expensive looking.
Much of the value is already priced into the assets, and the market is expecting high growth rates in the future.
This can be a catalyst to the downside if said expectations are not met.
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