Artificial Intelligence: Embracing the Future

For several years now, the term "AI" or "Artificial Intelligence" has been gradually becoming a more common topic in our everyday conversations. However, it has remained more of an abstract concept than a reality until recently. In the shadows, however, brilliant minds from all around the world were working tirelessly to bring these systems to life.

In December of 2022, the public was stunned by the power and potential of systems like OpenAI's ChatGPT, which has the remarkable ability to act as a personal assistant and simplify many aspects of our daily lives. Soon after, MidJourney.com emerged with its unique capability to produce original, AI-generated pictures in any style imaginable with only a few key prompts.

What does this mean for us as consumers and investors going forward? To answer that question, we must examine the broader AI ecosystem, weigh the advantages and disadvantages, and then delve into the specific companies that are currently leading the charge.

The field of Artificial Intelligence is rapidly expanding and has the potential to revolutionize the way we live, work, and interact with one another. Think of it like a computer that uses algorithms and statistical models to learn from data and improve its performance over time. Its impact on society and business is significant and growing, as AI is being used in many industries to automate tasks, increase efficiency, and improve outcomes.

At the foundational level, one of the most significant benefits of AI is its ability to automate routine tasks, freeing up humans to focus on more complex and creative work. For example, in the healthcare industry, AI is being used to analyze large volumes of patient data to identify trends and patterns that can inform diagnoses and treatments. Similarly, in the finance industry, AI is being used to automate trading, detect fraud, and manage risks. In the manufacturing industry, AI is being used to optimize production processes, reduce waste, and improve quality control. And in the transportation industry, AI is being used to develop self-driving cars, optimize traffic flow, and enhance safety.

While the markets are currently focusing on the AI efficiency gains for companies (Increased profits), it also has the potential to transform entire industries, creating new business models and disrupting established ones. For example, the rise of e-commerce and online marketplaces has been driven in large part by AI-powered recommendations and personalization. And in the energy industry, AI is being used to optimize power grids and improve the efficiency of renewable energy sources.

All these amazing improvements in efficiency comes with a cost - human jobs! As AI can perform an increasing number of tasks previously done by humans, there is a risk that many jobs may become redundant. This could have a significant impact on society, particularly for those who rely on low-skilled jobs. There is speculation that the recent wave of layoffs being reported is not necessarily due to overstaffing during the titanic market rally over the past decade, but rather the result of AI systems rendering the traditional worker obsolete.

As traders and investors, we need to exercise prudence when dealing with this nascent industry. Similar to the dot-com era, when a soda-making company could simply add ".com" to their name and experience a 600% increase in their stock price, numerous firms will falsely claim to be AI companies to inflate their stock prices. Therefore, it is imperative to approach investments with caution and conduct thorough research. Presently, there are numerous AI-focused companies publicly traded on US exchanges.

Anyone familiar with the space knows that usual suspects when it comes to AI: Were talking about the juggernauts like Apple (AAPL), Meta Platforms (META), Alphabet (GOOG), Amazon (AMZN), Microsoft (MSFT) and International Business Machines (IBM). All of which are pushing their company growth in many different directions, one of them being AI. For the more refined investor, it’s about finding investments which have their primary growth trajectory rooted in AI.

One of the major players in the AI arena seems like an unlikely choice: Nvidia (NVDA). AI involves data, mammoth amounts of data! To process it all, you’re going to need processers to handle it. NewStreet Research estimates that Nvidia has 95% market share for graphics processors that can be used for machine learning. Their A100 chip costs roughly $10,000 and is highly sought after by just about every company in the AI space. As they said during the gold rush, be the guy who sells picks and shovels!

In the future, your visit to the surgeon for that kidney transplant or heart surgery may not be handled by a human. Robots trained with AI may be at the helm with scalpel in hand! Intuitive Surgical (ISRG) offers the Da Vinci SP, a robotic surgical system currently designed to assist surgeons through a variety of procedures. Consider it a logical evolution from robots who assembled cars, to fixing and repairing humans!

Other companies, like Palantir Technologies Inc. (PLTR) are in the business of AI-powered data analytics. They us AI to help optimize military supply chains, identify and prevent terrorist attacks, track infectious diseases and much more. While a large part of their business comes from the US government’s defense and intelligence sectors, they are looking to expand into the private sector.

Another I find particularly interesting is UiPath (PATH). They have developed automation technology which enables software to read emails, images and documents and relay the information to robotic systems. Imagine having an assembly line for a car and needing to modify the headlights shape. Simply send the specs to the robots and it will be able to make the modifications by itself. 

There are dozens more companies we could look at which are expanding into major market industries like consumer goods, defense, data protection, energy, healthcare and much more. Ultimately, every industry will be impacted, and this presents opportunity.

A big unknown is regulation. What steps will be taken to develop regulations and standards that ensure AI is used in a responsible and ethical manner? What steps need to be taken to create education and training programs to help workers transition to new jobs in the AI-powered economy? The 2024 election will no doubt use this as a platform for the respective political parties.

At the end of the day, AI technology has the potential to transform society and business in many positive ways. Its ability to automate routine tasks, optimize processes, and improve outcomes is already having a significant impact across many industries. For investors, it opens the door to a whole new world of exciting investment and trading opportunities.

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