Hello, Reader.
One of the world’s first motion pictures captured what is now an everyday sight. But in 1896, it might as well have been a horror film.
L’Arrivée d’un train en gare de La Ciotat shows a steam locomotive pulling into a station in La Ciotat, France, while passengers wait on the platform.
When this 50-second-long film premiered inside theatres, it allegedly caused a fear-induced stampede. As the tale goes, viewers thought the train was going to drive right into them. A panicked rush for the exit ensued.
Similarly, the introduction of railroads themselves sparked widespread public fear in the 19th century. Concerns ranged from physical harm to fears that traveling by train could cause insanity. Yet railroads became essential to modern society.
More than a century later, the same fear is once again “chugging along” the same track. Only this time, it’s playing out in the markets.
Artificial intelligence has become the market’s hottest trend, but it is now facing growing public skepticism. The Pew Research Center’s latest study highlights this shift. It reported that 52% of Americans are now more concerned than excited about AI’s spread, up from 39% in 2021.
Even Bill Gates, co-founder of one of AI’s largest infrastructure providers, Microsoft Corp. (MSFT) outlined his AI-related concerns in a blog post this week. In a follow-up interview with The New York Times, Gates stated that he chose to speak out now because “recent improvements in AI had far surpassed his expectations.”
We find ourselves in an AI paradox: Backlash towards AI is growing even as its usefulness increases. And that puts us investors in a unique spot.
The AI train isn’t stopping because people are afraid of it. It may simply mean we need to look beyond the headline-grabbing names and identify where the technology is creating real, measurable value. The key is to look for companies where AI is becoming an economic advantage, even if AI sentiment starts to “derail.”
So, in today’s Smart Money, I’ll detail three areas where I believe investors should look for opportunity and share a few examples of each.
Then, I’ll share how we’ve built a portfolio specifically designed to capture these opportunities, especially as the AI narrative evolves.
Where the Real Opportunity Lies
First, there are the companies that AI needs. These are the picks-and-shovels plays, like fiber optics, memory, networking, power, cooling, data centers, and other physical infrastructure.
For instance, Corning Inc. (GLW) supplies the optical fiber and connectivity that data centers need to move enormous amounts of data. Shares of the company suffered a major selloff in July amid concerns about the sustainability of AI spending. But its second-quarter earnings remained strong: Optical Communications sales rose 32% year over year to $2.07 billion, with Gen AI product sales growing even faster.
AI sentiment can sour, but data centers still need fiber.
Then, there are the companies that use AI to become better businesses. Think: healthcare companies using AI to accelerate drug discovery, industrial companies using it to automate processes, or software companies using AI to make their products more useful.
The key is that AI isn’t the product; it’s the productivity engine.
Take Bristol-Myers Squibb Co. (BMY), for example. The biopharma company is using AI to potentially make drug discovery faster and more efficient. Just last week, the biopharma company announced a collaboration with Chai Discovery to use generative AI for therapeutic antibody discovery.
Bristol-Myers isn’t an AI stock, but it’s quietly using the technology to improve its core business. It’s a prime example that AI doesn’t have to be popular for companies to keep finding ways to use it.
Finally, there are companies benefiting from the problems that AI itself creates.
Cybersecurity threats, enormous electricity demand, and data-center capacity constraint are just a few of the challenges AI is creating – and each one creates opportunities for companies that can solve them.
Let’s look at electricity demand. As AI data centers consume more power, companies like Devon Energy Corp. (DVN), a major natural gas producer, stand to benefit from the growing need for reliable power.
I want to note that while AI sentiment may be fading, AI spending isn’t. Yesterday’s earnings report from Nvidia Corp. (NVDA) shows that the AI train is still moving forward. Nvidia reported $96.2 billion in quarterly revenue, up 106% year over year, while Data Center revenue jumped 117% to $89 billion. It also expects $108 billion in revenue next quarter, signaling that demand for AI infrastructure remains incredibly strong.
The public and investors alike may be growing concerned about the AI story, but companies are still spending heavily to build it. And that means that the opportunities may not disappear; they may simply move from those building the technology to those putting it to work.
How We’re Investing Through the Backlash
A stampede for the exit is an understandable response to fear, especially within the unknown. But a panicked rush out of AI-related companies would be misguided.
History has shown that technologies powerful enough to create new fears are often powerful enough to create even greater opportunities.
That’s the thinking behind the AI Revolution Portfolio service I created with my InvestorPlace colleagues Louis Navellier and Luke Lango. Rather than betting on AI hype alone, we’re focused on companies positioned to benefit as AI moves from novelty to necessity…
Including the infrastructure that powers it, the businesses putting it to work, and the companies solving the problems it creates.
These kinds of companies make up our portfolio.
In other words, we’re not simply investing in AI. We’re investing in the economic ripple effects of AI.
And that’s why growing skepticism towards AI doesn’t change our conviction in the technology. If anything, it reinforces why we built the AI Revolution Portfolio the way we did.
AI Revolution Portfolio is specifically designed to capitalize on AI-driven change, featuring a diverse range of holdings such as biotech firms dedicated to enhancing lives, a company specializing in streamlining recycling processes, and a software firm serving the restaurant industry, among others.
The question isn’t whether AI will remain popular. It’s whether AI will continue finding its way into the parts of the economy where it creates measurable value.
If/When/As it does, then the investment opportunity may be much broader – and much more durable – than today’s AI sentiment suggests.
Click here for more information on how to join AI Revolution Portfolio.
But the clock is ticking – this invitation expires tonight.
Learn more before it’s too late, because opportunities like this don’t wait at the station.
All aboard!
Regards,
Eric Fry
The post The Best Time to Buy AI? When Everyone’s Afraid of It appeared first on InvestorPlace.
