Beyond Nvidia: Hidden AI Picks with Marc Chaikin

Summary

Mark Chen, founder of market research firm Shen Analytics, discusses AI investment opportunities in an interview. He notes AI's potential to transform industries but cautions investors to avoid money-losing companies just using AI as a buzzword. Chen spotlights chipmakers like Nvidia as obvious plays but urges looking deeper at stocks like IBM and service providers gaining from AI adoption. He advocates diversifying across sectors transformed by AI, managing risk through avoiding losers, and selling strength. Chen highlights stocks his firm recommends benefiting from rising AI productivity like Nvidia, procore, UIPath, and Crowdstrike.

Takeaways

• 😊 AI and machine learning have been around for decades, but recent advances in computing power and data have led to an AI revolution
• 💡 AI presents a massive investment opportunity across industries like biotech, cybersecurity, consulting etc.
• 😮 Valuations of some AI stocks like NVIDIA are over $1 trillion making them more valuable than many country GDPs
• 🤔 It's important to look beyond the hype and avoid money losing AI stocks that lack fundamentals
• 🔍 Finding AI opportunities requires digging deeper and looking across various sectors as AI use cases expand
• 📉 Momentum can drive AI stock prices to irrational exuberance, so reasonable valuations and fundamentals are key
• 😃 Using ETFs that focus on AI is a good way to research individual AI stocks to invest in
• ⚠️ The benefits of AI far outweigh the risks, but there are legitimate concerns around potential misuse
• 🔐 Cybersecurity is essential for organizations implementing AI and presents strong investment potential
• 💰 Productivity enhancements and efficiency gains from AI lead to higher profit margins that the stock market rewards

Q & A

What major developments have caused the recent surge in AI feasibility and applications?

The major developments are the exponential increase in computer power and data that have recently converged to make AI much more feasible than before. This is enabling AI to be applied in many more real-world situations.

What industries and applications is Mark most excited about for AI?

Mark is most excited about the potential for AI in biotech, cybersecurity, and solving problems in general across many industries. He thinks AI will have a bigger impact than previous tech revolutions like the internet and cloud computing.

What is Mark's advice for average investors looking into AI companies?

Mark advises being wary of companies that start using "AI" as a buzzword without having a history of making money. The press often focuses on the big, obvious names, so investors need to dig deeper to find opportunities.

What does Mark recommend as an easy way to research AI investment candidates?

Mark recommends looking at the portfolios of AI-focused ETFs like aiq and wtai. The stocks held in those ETFs expose investors to companies involved in AI that they may be missing.

Why does Mark consider IBM a hidden AI investment opportunity?

IBM has AI/machine learning experience through Watson, their well-known AI that competed on Jeopardy. They also have an established consulting business that can help companies implement AI, making them a hidden contender.

What two non-intuitive risk management techniques does Mark recommend?

Mark recommends 1) avoiding likely loser stocks rather than trying to predict winners, and 2) selling into strength - taking some money off the table when you have a big winner, locking in returns.

What four areas does Mark recommend diversifying into for AI investments?

Mark recommends diversifying into 1) chipmakers, 2) software companies using AI, 3) AI consultants, and 4) cybersecurity companies using machine learning.

What AI-related stocks has Mark's firm recently recommended?

Some AI stocks Mark has recently recommended are Procore Technologies, UiPath, IBM, and Crowdstrike.

How does AI drive profitability and stock market gains?

AI drives gains by enhancing productivity - improving workflows, allowing companies to increase output with fewer people. Rising profit margins reward shareholders.

Does Mark think we are in an AI bubble currently?

No, Mark thinks while some stocks may get overvalued, the AI revolution will drive growth for the next 20 years. It is a long-term secular trend still in early days.