Top strategist says every investor needs some hyper-growth exposure and these A.I. stocks could do the trick
Investors searching for hyper-growth exposure should turn to artificial intelligence-focused stocks, according to Adam Parker, founder and CEO of Trivariate Research. Parker estimates that in the next 10 to 20 years, between 20% and 50% of all human activity will be affected if not totally commoditized by A.I. “This could have a massive implication on humankind and the stock market,” he wrote. In fact, the technology is already affecting stocks more than people think, he said. As much as $700 billion of the $2.5 trillion year-to-date market cap creation this year for growth stocks can be related to the potential of A.I., he said in a note Monday. “A.I. is taking off NOW and has investable implications today,” said Parker, who spent several years at Morgan Stanley as its chief U.S. equity strategist and global director of quantitative research. To that end, Traivariate created a basket of 25 AI-related stocks. To come up with the names, the firm used a language processing algorithm to screen company transcripts of 170 U.S. growth stocks for AI-related business keywords. Those keywords, suggested by ChatGPT, included AI, ML/machine learning, ChatGPT and language model. The year-to-date performance of the basket has been stronger than the growth universe excluding AI, Parker noted. Some stocks don’t have oversized returns, which may mean the market doubts the transcript-usage of AI terms for some more than others, he said. “Nonetheless, 15 of the stocks are up more than 20% YTD, so clearly there is some A.I. effect responsible for these stocks’ appreciation year-to-date,” he wrote. Here are the top 10 names with the most AI references. Nvidia has become the poster child for AI and tops the list with 86 references to AI, three references to machine learning and six to ChatGPT in its last transcript. The company has more than 95% of the market for AI chips , according to New Street Research. On Tuesday, the company announced new software to prevent AI models from mentioning harmful subjects, stating incorrect information or opening up security holes. The stock has been on a tear, with shares up more than 80% year to date. Yet, investors dismissing it as overvalued do so at their peril, Parker said on CNBC’s ” Closing Bell ” Monday. “You can look at a stock like Nvidia and say ‘it’s up too much’ … but maybe it’s just really cheap on a five- or 10 year view,” he said. Alphabet and Microsoft are also full-steam ahead with AI. Microsoft announced a multi-year, multibillion-dollar investment in ChatGPT-maker OpenAI in January and, in February, showed off AI-powered updates to its Bing search engine, and its browser, Edge. CEO Satya Nadella told CNBC AI is the biggest thing that is going to happen to Microsoft since he took the helm nine years ago. “I’ve never ever felt this liberated in terms of opportunity in the days ahead,” he said. Meanwhile, Alphabet unveiled its AI chatbot, Bard, at an event the day after Microsoft touted its AI technologies, earlier this year. Earlier this month, CEO Sudnar Pichai told CBS’ “60 Minutes” he tried several of Google’s artificial intelligence products and was left “speechless” by the capabilities of the products. “We need to adapt as a society for it,” Pichai said of AI. “This is going to impact every product across every company.” Cloud networking solutions firm Arista Networks and UiPath rounded out the top five. Arista us up about 30% year to date, while UiPath has gained 14%. — CNBC’s Michael Bloom contributed reporting.
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