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.
But with the momentum behind the AI revolution, that sounds pretty hard to believe. However, 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…
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 – at first – 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
AI is tricky.
You can’t go to the store and grab an AI off the shelf as easily as you can buy a new toaster.
Rather, the best way to target the AI megatrend is to look for AI appliers.
The obvious go-tos are big-tech names like Microsoft, Amazon, Alphabet, and of course, the media’s crown jewel of the AI game, Nvidia…
But the obvious choices aren’t always the best.
These household names already have tons going for them…
Like arriving more than fashionably late to a holiday party, the grazing table has already been pretty well picked over. You’re lucky if you get a cube of your favorite cheese or grapes that aren’t mushy.
Meaning, most of the big money has already been made for Microsoft, Alphabet, Nvidia, and Amazon.
That’s why I’m zeroed in on the less obvious choices…
And they carry far more profit potential.
Consider, for example…
- One company that is a leading innovator and competitor in the joint replacement business. It provides the full range of solutions for joint-replacement surgeries – from leading-edge prosthetics to surgical robots to AI-enabled patient-diagnostic and monitoring systems. According to GlobalData analysis, orthopedists performed approximately three million knee reconstruction surgeries worldwide in 2020, but only 11% of those surgeries were completed with the support of robotic assistance. That percentage should grow significantly over the next few years, giving a large addressable market to this company…
- A dual renewable energy/AI company whose software uses advanced artificial intelligence and machine learning to help its customers – including utility companies, electric vehicle fleet operators, and other large organizations – automatically switch between battery power, onsite generation, and grid power. Its total bookings have rocketed 1,000% over the last three years – producing an even larger jump in revenues…
- And one company that is the leading platform for creating and operating interactive, real-time 3D content for video games and other specialized commercial applications. Today, most of our screen-based interactions – from images we post on Facebook, to Zoom calls, to streaming videos, to computer games, to dating apps – operate in 2D. But 3D is coming… quickly. That means programmers will be spending years converting our 2D paradigm into a 3D metaverse, while also creating entirely new 3D products and solutions…
Like the neural pathways in the brain, the AI mega-boom creates an intricate “spiderweb” of trends that each have their own incredible profit potential.
We’re only in the very early stages of this trend, and as I’ve said in the past, catching just one of these megatrends at the right time (i.e., now) can lead to life-changing gains…
Your Next Steps
Clearly, a “Wild, Wild West” of AI technologies is unfolding before us. More companies than we could have thought possible are putting their chips into this trend – in more ways than we thought possible.
Most of the early-stage AI initiatives are still too new and/or small-scale to make any significant contribution to a company’s bottom line… yet.
But they 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, on Tuesday, Nov. 14, at 7 p.m. ET, I’m going live with the Extreme Alpha 2.0 Summit to share with you how I’m using AI to enhance my recommendations…
Now, I don’t often participate in high-profile events like this.
Most of the time, I prefer to stay behind the scenes, analyzing the markets, so that I can pinpoint the kinds of stocks that can deliver market-beating returns.
That’s the only way I know to help my readers excel in the markets and turn their financial goals into realities.
And so far, so good.
Those readers who’ve followed my recommendations since the ‘90s have had more than 40 opportunities to capture 1,000%-plus gains. But I think we’re just getting started…
There are many more 1,000% gains to come.
That’s why on Tuesday, Nov. 14, at 7 p.m., I’m going live with the Extreme Alpha 2.0 Summit.
Be sure to save your spot for this event.
Regards,
Eric
P.S. You’ll gain access to exclusive content by signing up early for this event – including how I identify big megatrends, the art and science of finding 1,000% winners, and what my big three predictions for 2024 are. Go here now to sign up.
