Investing Strategies for the Age of Artificial General Intelligence

Editor’s Note: Adapting to your environment is crucial for survival. This idea, articulated by Charles Darwin, highlights the importance of evolution.

In the business landscape, the need for adaptation is becoming even more significant with the rise of a new kind of artificial intelligence—artificial general intelligence (AGI).

AGI possesses human-level intelligence and can operate autonomously. While it may seem far-fetched, its arrival is imminent. My colleague, Eric Fry, emphasizes the urgency of adapting to this change, stating we are on “The Road to AGI.”

Today, Eric outlines three types of stocks to consider in order to navigate “The Road to AGI.” Take it away, Eric…

**********************

Hello, Reader.

In today’s fast-paced business world, only companies that adapt will thrive.

Currently, every organization faces a critical decision: evolve with technology or risk extinction.

Technological advancements—especially in artificial intelligence—require businesses to either adapt or fade away.

In December 1831, a young Charles Darwin began his voyage on the HMS Beagle, embarking on a journey that would lead to his formulation of the theory of evolution by natural selection. This theory suggests that those best suited to their environment will survive and pass on their advantageous traits.

This principle applies to the business environment as well.

Rapid change is now the norm, and companies that can adapt swiftly will emerge as market leaders.

Conversely, businesses that drag their feet on adaptation are at risk of becoming obsolete.

As we approach AGI’s development, every business must confront the reality of adaptation or face decline.

AGI is characterized by machines achieving human-like intelligence and completing tasks independently.

OpenAI CEO Sam Altman recently stated that they already know how to create AGI, indicating that this technology is on the near horizon.

This shift fundamentally alters how investors should approach their portfolios.

Understanding a company’s interaction with AGI will now shape stock investment strategies. Firms that embrace AI technologies will be more likely to succeed.

Those that do not adapt risk becoming obsolete, and urgency is paramount.

To identify winners in this evolving landscape, I have established a three-step process for investing along “The Road to AGI.”

Step 1: Invest “In” AI

This involves purchasing shares of companies that provide essential infrastructure to support the advancement of AGI.

AI chip manufacturers are prime examples. They play a vital role in supplying the computational power required for AGI.

Initially, the AI chip market was projected to reach $341 billion in ten years, but it is now on track to hit $501 billion in just eight years.

Investors are understandably eager to get in on this growth, but the competition is fierce.

Companies like Nvidia Corp. (NVDA) and Super Micro Computer Inc. (SMCI) are industry leaders known for developing AI-focused GPUs and servers.

However, if you examine the components of future AGI chips, you’ll find many of the same raw materials across different manufacturers.

Thus, my strategy focuses on the companies supplying these critical components rather than just the well-known manufacturers.

Step 2: Invest “Alongside” AI

This means targeting companies expected to prosper as AGI develops.

Many investors mistakenly believe that investing heavily in technology stocks is the sole path to wealth generated by AI. However, by investing “alongside AGI,” there’s potential for building wealth with reduced risk.

Data centers are essential for AGI’s growth. Nvidia’s CEO Jensen Huang predicts a $1 trillion investment over four years in AI data centers, primarily made by Amazon.com (AMZN), Alphabet Inc. (GOOGL), Microsoft.com (MSFT), and Meta Platforms Inc. (META).

For instance, in Vint Hill, Virginia, land prices for future data centers have surged tenfold in recent years.

Therefore, “investing alongside AGI” involves looking at industries that provide the necessary physical infrastructure for AGI development.

Step 3: Invest in “Stealth” AI

This approach targets non-tech companies that intend to adopt and leverage AI for efficiency and profitability.

Sectors such as shipping, logistics, beauty, fashion, wellness, and food and beverage are examples of “stealth AGI” industries. These companies may seem less exciting compared to tech giants, but they are set to enhance profitability through AI implementation.

Biotech, in particular, shows promise in this area as AI is accelerating drug discovery, personalizing treatments, and predicting diseases before they arise.

Survival of the Fittest… AGI Style

Companies positioned to benefit from AGI include:

• Those supplying materials for AI hardware and software.
• Entities investing in infrastructure like data centers.
• Firms applying AI in diverse products and services, such as biotech companies.

In summary, businesses that leverage the opportunities presented by AGI will be the ones to watch in the evolving market landscape.