The Smartest Way to Invest in Artificial Intelligence

By Lou Basenese, on Tuesday, September 29, 2020

Last week, I shared that the high-tech research arm of the U.S. Department of Defense (DARPA) is tipping us off to the next big tech trend — and the next big investment opportunity:

Artificial intelligence (AI).

You’ll recall, DARPA committed $2 billion to accelerate the development of AI technologies. And now this massive funding is sparking innovation throughout the industry.

So as promised, now I’ll share one of the smartest ways to profit from this boom.

So let’s get to it…

Don’t Be Afraid to Bet on Big Caps

I’ll confess, it’s counterintuitive that one of the smartest ways to bet on a big tech trend is with a large-cap company.

After all, when large companies do new things, it doesn’t generally have a near-term impact on their overall revenues, profits, or stock price.

But there are always exceptions.

For proof, look no further than Apple (AAPL).

We’d be hard pressed to find a better performer in recent years that capitalized on the major tech trends of smartphones, wearables, and mobile payments.

  • Over the last year, shares of the world’s largest company more than doubled.
  • Over the last five years, Apple’s stock rose more than 300%.

Meanwhile, over the same time periods, the Nasdaq rose just 37% and 131%, respectively.

This proves that large caps can be a smart way to unlock big profits from new tech trends.

You just need to make sure to invest in the sector’s dominant and most innovative player.

And when it comes to the next big trend ­— AI — that’s exactly what we’re going to do…

The “Brains” of AI: Semiconductors

At its core, AI involves the rapid processing of massive amounts of data, and then making inferences about the data to drive valuable activity.

For example: scanning millions of credit card transactions and flagging a single one as potentially fraudulent and temporarily deactivating the account.

Or, after scanning millions of images from car cameras, applying the brakes automatically to avoid a collision because a driver isn’t paying close attention.

The “brains” behind such AI functions are semiconductors.

And as I’ve shared before, semiconductors aren’t just the critical component behind AI… they’re also the critical component to every major tech trend of the future.

Add it all up — and there’s no better way to play the AI mega-trend than to invest in the leading chip maker in the space…

The Undisputed Chip Leader

And that’s where NVIDIA Corporation (NVDA) comes into the picture…

Nvidia does precisely what Apple does so well: it identifies the next major growth market, and then applies its expertise from previous trends to dominate the new one.

And in the process, it keeps generating more and more revenue and profits.

Consider…

Nvidia started out as a leading provider of video-game chips.

Then, as the autonomous vehicle trend started ramping up, management realized that its expertise and technologies could be leveraged to dominate this new market, too.

Sure enough, in the last year, the company generated nearly $700 million from autonomous vehicle chip sales. And that’s on top of its sales from video-game chips.

But when the AI boom started, Nvidia management realized it had another opportunity…

$1 Billion in One Quarter

With AI as the driving force, Nvidia’s data center business generated almost $1 billion in the last quarter alone.

And as I shared last week, the AI boom is just getting started.

By 2025, annual spending on AI systems is expected to soar to almost $120 billion. That represents an increase of about 1,148% from 2018 levels.

Nvidia’s already handing investors big profits. It rallied 199% in the last year. But don’t let that fool you into thinking it’s too late to capitalize on this opportunity.

With the right strategy in place, big companies can just keep getting bigger.

For proof, look no further than Apple, and its quick ascent from the first one trillion-dollar market cap company, to the first two trillion-dollar market cap company.

And thanks to the AI mega-trend, I predict that’s precisely what’s about to happen with Nvidia.

So don’t miss out!

Ahead of the tape,

Lou Basenese

Ahead of the tape,
Lou Basenese
Lou Basenese

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