Editor’s note: “It’s Time to Bet Big on AI” was previously published in February 2023. It has since been updated to include the most relevant information available.
In the midst of all this stock market volatility, I’m busy doing one thing: looking for generational investment opportunities.
I’m pretty I’ve found one in.
Ever since ChatGPT’s launch in late 2022, everyone has been buzzing about AI. But I’ve been researching this stuff for over five years now. And I can tell you that this is about much more than an online chatbot.
AI technologies represent one of the greatest technological paradigm shifts of our lifetimes.
And this shift isn’t something that will happen in 10 or 20 years. It has already started. And I think that in just a couple of years, AI will be running the world.
That is, over the next few years, we will go from living in a human-driven world to living in a robot-driven one. And as a result, our global economy will be forever transformed.
It sounds a tad science fiction, I know – like something out of I, Robot. But science fiction is actually on the cusp of becoming reality. That’s how big this change is…
Why am I so certain of this?
Because AI – like every major technological paradigm shift before it – is being driven by a convergence of need and ability. The world needs AI, and now society is able to build it.
When need meets ability, the world changes.
And that’s exactly what we have with AI today.
The Urgent Need for AI
Let’s talk about the “need” part first.
In short, the world needs to fix inflation. And ubiquitous adoption of automation technologies is the only way to suppress inflation permanently.
There are two parts to the inflation problem. The demand for goods and services is too high, and the supply for them is too low.
The Fed can solve the first part. Hike interest rates. Choke off consumer spending. Suppress economic demand – pretty easy.
But rate hikes don’t address the supply side of the inflation problem. The only way to fix that is if companies figure out a way to make more products and services. But to make more products and services in a human-driven world, you need more labor. That means companies need to hire more workers, which means more wages, consumer income, spending, and economic demand.
In other words, the present “solution” to fixing the supply side of the inflation equation will exacerbate the demand dilemma. And therefore, it won’t permanently resolve the inflation situation.
We need a different solution – and not an inflationary human-driven solution. We need a disinflationary automation-driven solution.
Automation Counters Inflation
Let’s play out the same scenario as above but in an automation-driven world.
A company needs to make more product. It deploys a series of automation technologies – both software and hardware – to make it.
Those technologies have a big upfront installation fee but very low recurring costs after that. Net impact to annual operating expenses? Tiny.
Yet, those technologies don’t sleep, clock out, or take vacations. They’re always working to make more product. Net impact to output? Huge boost.
The overall result – the company can make a lot more product at a fractionally higher marginal cost. Supply goes up without producing more economic demand.
Automation is the panacea to our current inflation problem.
Companies are starting to realize this. That’s why they’re starting to turn toward automation technologies in 2023. And so emerges the multi-trillion-dollar Automation Economy.
These Technologies Have Arrived
Automation technologies have progressed rapidly over the past few years. They’re now at a point where they’re capable of creating meaningful real-world value – and at the perfect time, too!
For example, Walmart (WMT) is in the process of automating all its warehouses with an end-to-end robotics system. It will unpack, sort, store, and repack inbound and outbound parcels with a combination of robot arms and mini autonomous vehicles.
That’s after Amazon (AMZN) has already automated all its warehouses with its own robotics system. Plus, the company also acquired both iRobot (robotic vacuum maker) and Cloostermans (warehouse robotics firm). That was just months after unveiling its first-ever home robot.
Clearly, Amazon is making a big push in AI.
In the restaurant world, fast-casual chains like Chipotle (CMG), Wing Zone, and White Castle are using robots to make food. Other chains like Chili’s are using robots to wait tables.
And the automation takeover has arrived in retail, too. Robots and autonomous vehicles are being used to stock shelves, clean store aisles, and deliver food orders for chains like Domino’s Pizza (DPZ).
The Automation Revolution has touched down in the media and entertainment world as well. Have you seen those ads that say, “this ad was probably written by a robot”? What about those drawings that were created by Dall-E, the AI that generates pictures from queries? How about Jasper, the AI writing machine? And we know you’ve heard of ChatGPT.
That’s just the tip of the iceberg. Experts predict that by 2026, 90% of all online content will be produced by AI.
Alas, I rest my case. The world doesn’t just need automation technologies today. It has automation technologies it can readily deploy, too.
The Final Word on AI Stocks
Every market crash is an opportunity to buy the “next big thing” for dirt-cheap while everyone else is worrying about short-term problems that will pass. (Indeed, they always do).
In the 1980s, that “next big thing” was the computer. In the 1990s, it was the internet. Then in the 2000s, it was the smartphone. And in the 2010s, it was electric vehicles.
Now, in the 2020s, it’s AI.
The time to bet big on automation stocks is today, while they’re still trading for just a few bucks. Take advantage before they absolutely soar over the next decade.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.