Charlie Munger, the long-time Vice Chairman of Berkshire Hathaway, says there are three buckets where investment ideas go: “Yes,” “No,” and “Too Hard.” Most of the prospective artificial intelligence investments we encounter fall squarely into the “too hard” bucket.
With the momentum behind the AI revolution, that sounds pretty hard to believe. But there are two major reasons that Munger is right.
- For starters, artificial intelligence is not a specific, tangible product like a toaster.
It is a broad category of software-enabled processes that take on more shapes and forms than Proteus.
Because AI performs a wide variety of functions across a wide variety of industries, most of us ordinary investors cannot easily determine the value that any one form of AI contributes to a given company.
- The AI initiatives at many companies are so early in their development that they are years away from generating significant profit growth.
Even worse, many of the “pure-play” AI companies are producing sizeable losses and will not become profitable any time soon.
For all of these reasons, most AI investments are simply “too hard.” Normally, therefore, we would ignore them and move on to investments that are easier to understand and quantify. But we don’t really have that luxury… at least not if we want to equip our portfolios to thrive in the years ahead.
Like Glenn Close in the 1980s thriller, Fatal Attraction, AI investments “will not be ignored.” They will demand our attention for years to come.
To provide a sense of the breadth and depth of AI technologies heading our way, consider the following public company.
It should sound familiar…
Is This The Next Explosive Market Sector?
A select group of stocks are going bananas. With 230%, 379%, ever 865% gains and only a handful of investors have caught on… Here’s how to get in.
One Company Capitalizing on the AI Megatrend
Freeport-McMoRan Inc. (FCX) is the world’s largest copper miner. The terms “copper miner” and “artificial intelligence” do not obviously relate to one another. But in the case of Freeport, they do.
Freeport has been using a machine-learning model at its Bagdad copper mine in Arizona to boost production. This model uses data from sensors around the mine to “tailor” the ore-processing method to each of the seven distinct types of ore that come from the mine.
Because of the company’s success with AI at Bagdad, it is rolling out the technology across several other mines and expects to increase its annual copper production by a hefty 5% “with very little capital investment.”
That’s an extra $800 million per year of “free earnings” for a company that earns about $3 billion per year.
Down the road, Freeport’s AI technology could enable the company to tackle more complex projects, and to extract value from places where its competitors cannot. That advantage could become incredibly valuable in a world that’s starving for battery metals like copper.
The Next Phase of the AI Megatrend
Clearly, a “Wild, Wild West” of AI technologies is unfolding before us.
Most of the early-stage AI initiatives I’ve highlighted above are still too new and/or small-scale to make any significant contribution to a company’s bottom line… yet.
But all of these examples demonstrate that the AI megatrend is real, powerful, and gaining momentum by the day.
Fortunately for we investors, this megatrend is still in its infancy, which means it will nurture a growing number and variety of investment opportunities over the coming months and years.
To better explain, I recently held an “AI Impact Event” with my colleagues Luke Lango and Louis Navellier.
In it, we showed viewers what AI’s $15 trillion wealth shift could mean for them.
This event was something we’ve never done before… the first time Luke, Louis and I joined forces to create a brand-new research service.
It’s called The AI Revolution Portfolio. And in it, you’ll find 9 AI stocks we’ve selected for their hypergrowth potential in the months and years ahead.
Click here to find out how to sign up for the AI Revolution Portfolio today.
Regards,
Eric Fry
Editor, Smart Money
