Having exposure to specific trends that are going to outperform over the coming decade is critical for your portfolio … Do you have exposure to this trend?
If you’re a tennis fan, you might still be riding the adrenaline high …
This past weekend, in what will go down as one of the greatest U.S. Open finals in history, Raphael Nadal held off an exhilarating comeback from Daniil Medvedev to capture his 19th career grand slam. It was two world-class athletes at their best. Simply amazing tennis.
At the same time, deep in the underbelly of Arthur Ashe Stadium, reached through a labyrinth of service corridors and tight security, there was something else happening that was equally amazing, though in a different way …
High-performance computers from IBM were capturing, sorting, and analyzing mass quantities data from the match above. In fact, it had been happening throughout the entire tournament. By the end of the U.S. Open, more than 31,000 data points were analyzed.
You see, the U.S. Tennis Association has joined a growing number of businesses and industries that are benefiting from a trend that’s radically reshaping our world and changing our day-to-day lives. This shift is happening right now, and is only going to intensify as we move forward.
I’m talking about Artificial Intelligence (AI).
In the case of the U.S. Tennis Association, AI is being used to quantify and benchmark a player’s physical performance during a match.
In the past, coaches had to sort through video footage after a match by hand, marking shots, serves, break points, and other various points of reference for analysis. It was a painstaking process that required a great deal of time.
Enter IBM’s new AI tool, “Coach Advisor.” Now, going through footage is automated, and delivers detailed analysis on a far-greater scale than was ever possible before.
From The Wall Street Journal:
A model trained to recognize factors such as distance traveled, position on the court and serve speed can process the video footage in much the same way as a human analyst would, but much faster.
This allows coaches to measure how training regimens affect performance and pinpoint room for improvement. It also gives coaches the ability to know when their players might need saving from themselves, to avoid injury.
This is just one small example of AI. Its reach is far more expansive, and is changing how we live our lives. As part of this, massive investment wealth is going to be created over the next decade … at least that’s the opinion of two of our most respected analysts, Matt McCall and Louis Navellier.
Now, what’s interesting about this dual-endorsement from Matt and Louis is that they approach the markets from different perspectives. Matt is primarily a thematic investor. He specializes in identifying major trends that are re-shaping our world, and by extension, the investment markets.
Louis focuses more on stock fundamentals regardless of the sector or any trending investment theme. He looks at cold, objective metrics — the ones that drive corporate profitability … which translates into soaring stock prices.
But with AI, we have both Matt and Louis excited about the wealth-building potential despite their different market orientations. And anytime this overlap happens, we take notice.
So, in today’s Digest, let’s look more at AI, and why this massive trend deserves exposure in your portfolio.
***The invisible omnipresence of Artificial Intelligence
As you go about your everyday routine, how much do you think about AI?
Odds are, very little.
AI isn’t necessarily flashy or obvious like we might have envisioned it being years ago. Perhaps that’s why few people believe they’re interacting with AI.
In a recent update to subscribers, Louis Navellier pointed this out:
… people still think of A.I. as something that will happen in the future — not really part of daily life:
In a similar poll last year from a U.K. firm, Bristows, even fewer respondents said they’ve interacted with A.I. — just 15%!
But that number should be much higher — and here’s why:
When you ask people about specific applications of A.I., it turns out that almost everyone does, in fact, use A.I. in daily life. According to Pegasystems (a Boston-area software company), 84% of people use A.I. devices and services.
If you’re wondering how this could be possible, Matt McCall has the answer for you. From his recent Investment Opportunities issue:
When you pull up an app to listen to music — that is AI.
When your banking app sends you an alert that you have bills due — that is AI.
When Google Maps reroutes you because of traffic — that is AI.
When you log into LinkedIn to look for a new job and the website has recommendations for you — that is AI.
When Uber or Lyft determine ahead of time how long your ride to dinner will take — that is AI.
When you fly home for Thanksgiving, that plane is basically flying itself — thanks to AI.
Rather than being some obvious, clunky overlay on top of our daily lives, AI is increasingly becoming a near-invisible force that’s integrating itself seamlessly into our existence. And was it suddenly to not be there, its absence would be glaring.
Rotating to the investment implications of this, according to PwC, AI contributed $2 trillion to the global economy last year. By 2030, that number could be as high as $15.7 trillion.
As Matt recently pointed out to his subscribers, that’s 685% growth in 12 years.
Let’s dig into the numbers further to see just how big of an opportunity this is.
***AI by the numbers
A study by Gartner of over 3,000 chief information officers around the world showed that AI implementations jumped 270% over the last four years. This is only going to increase as the applications become more seamless.
In part, this growth is what’s behind the huge, dollar-figure projections attached to AI.
Bill Gates, the co-founder of Microsoft and one of the smartest people on the planet, says deep learning (a coming evolution of AI) could equal 10 Microsofts. That’s about $10 trillion. Cathy Wood from ARK Investments, one of the smartest analysts I know, predicts deep learning could grow even more to $17 trillion.
And here’s an even bigger estimate. The chart below from Persistence Market Research shows deep learning increasing nearly 40-fold from this year to 2027 when it should hit $25 trillion.
Any way you slice the numbers, I see the upside in AI and more specifically deep learning as one of the greatest wealth creation opportunities in the next decade.
***So, how can you get exposure to AI?
There are several ETFs that have been engineered to give investors broad exposure to the trend. For instance, there’s the Global X Robotics & Artificial Intelligence ETF (BOTZ).
As you can see below, after a big run-up through spring, it’s pulled back and is tracking the S&P.
There’s also the iShares Robotics and Artificial Intelligence Multisector ETF (IRBO). It also had a big spring before pulling back. But it’s still up nearly 24% on the year as I write.
But as we pointed out in a recent Digest, investing in ETFs isn’t likely to be the most explosive way to play AI. That’s because when you’re investing in ETFs, you’re actually investing in dozens of individuals companies, if not more. Any underperforming stocks are going to drag down the returns of the ETF.
Also, keep in mind the expense ratios for these ETFs. For IRBO, you’re paying 0.47%. BOTZ is even worse at 0.68%. While that doesn’t seem like much at first glance, the longer your hold period for the investment, the more these fees eat away at your returns in a profound way.
As an alternative, both Louis and Matt are focusing on specific, individual companies that are positioned to benefit as AI continues to saturate our lives.
Louis is zeroing in on the data-creation that’s related to AI, the amount of which is going to be staggering.
As scientists find even more applications for artificial intelligence — from hospitals to retail to self-driving cars — it’s incredible to imagine how much data will be involved.
To create AI programs in the first place, tech companies must collect vast amounts of data on human decisions. Data is what powers every AI system. As one AI researcher from the University of South Florida puts it, “data is the new oil.”
Louis recommends a company that makes the “brain” that all AI software needs to function, spot patterns, and interpret data.
It’s known as the “Volta Chip” — and it’s what makes the AI revolution possible. Louis has put together a special report called “The AI Master Key“ for his Growth Investor service that details this company. You can learn more by clicking here.
Meanwhile, Matt likes a specific software services company that helps its customers implement the strategies needed for digital transformation into an AI world. It focuses on helping businesses connect with clients and the client’s experiences.
It is not easy to find a company that is considered a pure play on the digital and AI sectors … (but this company) is a pure play on AI, and it is part of the red-hot software industry. I absolutely love software as a business model, mainly because it is scalable. Once the software is developed, customers can download it over and over again, which makes more and more money for the business.
To learn more about this company and read more from Matt about AI in his Investment Opportunities newsletter, click here.
As we wrap up, whether you prefer broad ETF exposure, or a targeted approach from Louis and/or Matt, AI needs to be on your radar.
Back to Matt for why:
(AI) is one of the world’s most powerful, most transformational technologies, and it is just starting to change the world in amazing ways …
Unfortunately, many people will miss this once-a-decade opportunity in artificial intelligence. That’s because the change this technology is creating is hard to spot. But trust me, one day millions of people will wake up and realize the way we shop, travel, work, and play has massively changed … and they let the opportunity slip by.
I hope you won’t let it slip you by.
Have a good evening,