Capitilising on the future of technology
When it comes to?investment themes, the standout performer of 2023 was undoubtedly Technology, backed by Artificial Intelligence (AI), fueling the remarkable gains of major players in the industry.?
Although AI emerged in the public consciousness in 2023, many business leaders expect it to expand and proliferate dramatically in 2024. According to iShares, 70% of US executives anticipate increasing AI resourcing next year, primarily motivated by efforts to cut costs.
Indeed, many tech companies already have integrated AI into pre-existing offerings, such as Microsoft's (MSFT) Office 365 Copilot.
According to a Forbes Advisor survey, businesses are using AI tools in the following ways:
Overall, there is a widespread adoption of AI in business, using the technology to automate processes, enhance customer service and personalisation, increase output, and analyse data. Overall, businesses are adopting AI to obtain a competitive advantage.
Some experts say that this is only the beginning for AI adoption in the business world.??In the coming year, enterprise AI adoption and product integration is anticipated to leap forward, with multi-modal AI moving closer to reality and hardware opportunities expected to expand beyond graphics processing units (GPUs).
For investors seeking substantial growth, AI seems to be the space to be. But for those inclined towards value investing, the terrain appears challenging. The esteemed "Magnificent Seven" tech companies are trading at premiums, with concerns looming over potential overvaluation.
Further, AI's potential remains largely speculative as it navigates through the testing phase. This ambiguity presents an additional hurdle for those attempting to gauge valuations within the industry.
While conversations regarding AI often revolve around the likes of ChatGPT and Google Genesis, the scope of AI is profoundly vast. Experts highlight its ubiquitous nature, poised to impact every sector and facet of life.
Moreover, the pace of AI advancement has accelerated rapidly. Predictions for the attainment of artificial general intelligence (AGI) have been pushed forward considerably, indicating a closer-than-expected arrival of human-like cognitive abilities.
To simplify matters, the AI landscape can be grouped into three segments: hardware, software, and the industries leveraging AI for competitive advantage. Each category presents unique investment opportunities, spanning from semiconductor and cloud companies to traditional sectors like healthcare and finance.
Despite the lofty valuations of the Magnificent Seven, there may still be value found within these companies. Amazon (AMZN), for example, has underestimated AI potential and robust fundamentals. Meanwhile, Nvidia (NVDA) is a standout performer, benefiting from its technological dominance and expanding market.
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Nvidia (NVDA)
Based in California, Nvidia's stock has witnessed staggering growth, with a 230% surge in share price throughout 2023. The company's stock has soared by over 1600% since the onset of 2019, painting a picture of unprecedented growth.
Beth Kindig, a technology analyst at Forbes, projected that if Nvidia's growth trajectory persists alongside static conditions elsewhere, the company could surpass Apple's (AAPL) market cap by 2026.
Earlier this month, during his keynote address at the GPU Technology Conference in California, Nvidia CEO Jensen Huang introduced the Blackwell chip, the latest advancement in artificial intelligence technology following the highly sought-after H100 "Hopper".
The new chip, named after the renowned statistician and mathematician David Blackwell, promises to be a significant leap forward, offering five times the AI performance of the Hopper while also reducing costs and energy consumption by up to 25 times.
While Huang did not disclose the exact pricing of the Blackwell chip, he hinted at its premium nature, jokingly referring to it as "quite expensive." He envisioned Blackwell GPUs as driving a new era of computing, facilitating advancements across various industries in collaboration with leading companies worldwide.
The demand for AI chips has surged, with the current H100 chips fetching prices upwards of $40,000 each. Amid supply shortages exacerbated by the pandemic, tech giants like Mark Zuckerberg have raced to secure substantial quantities, with plans to stockpile hundreds of thousands by year-end. Nvidia's sales have seen a significant boost, evidenced by its fourth-quarter revenue of $22.1 billion. However, challenges persist in markets like China due to stringent export controls. Additionally, companies such as Meta, Microsoft, Google, and AMD are poised to introduce rival chips, signaling intensifying competition in the AI hardware sector.
Despite these challenges, the overarching AI theme extends beyond individual companies like Nvidia, encompassing the entire semiconductor supply chain and software ecosystem. Companies like ASML and Taiwan Semiconductor Manufacturing (TSMC) stand to benefit alongside software giants like Microsoft, which is capitalising on AI-driven products.
Looking beyond the Magnificent Seven, opportunities abound in companies like Booking.com (BKNG) and Advanced Micro Devices (AMD), which are poised to leverage AI for transformative purposes. Even on the Australian Stock Exchange (ASX), AI opportunities exist, with companies like Goodman Group (GMG) and Pro Medicus (PME) showing promise in their respective fields.
While the future of AI presents its share of uncertainties, as it continues to evolve, it also presents a realm of untapped potential for investors. By identifying underappreciated AI prospects within fundamentally sound businesses, investors can position themselves at the forefront of this transformative wave.?
Please do not hesitate to contact me if you would like more information about exposure to this investment theme or in regards to your investment strategy in general.
Financial Advisor
7 个月Good article Tony.