The Pundits Are Dead Wrong About AI — How to Profit
There’s a massive misconception about artificial intelligence right now.
And it’s going to cost some investors a fortune…
I’ll paraphrase the argument I hear all the time: “AI is a novelty. It’s fascinating, but it’s far from being commercially viable.”
Self-driving cars crash and kill people. AI chatbots say horrific things. Lots of AI tech simply isn’t ready for prime time — or it’s downright dangerous.
But anyone who thinks we’re years from AI commercialization is dead wrong.
And that’s a big deal because artificial intelligence is very much a winner-take-all business. Investors who aren’t positioned for it now are going to miss out on generational upside.
More on that in a moment…
If you want evidence of the small opportunity window we’re witnessing in AI, just look at how much money the Big Tech firms who know the most about this stuff are throwing at it to acquire startups and bring on researchers. They know that if they fall behind, they’re forgoing a mountain of profit.
So what are investors getting so wrong right now? They’re under the misconception that AI needs to do really amazing things — flawlessly drive a car, communicate like a human, etc. — to be useful.
But that’s not at all true. The reality is that even pretty one-dimensional AI that’s readily available can be hugely useful to companies. In factories, AI is being used to detect defects on the production line, provide predictive maintenance and perform mundane tasks.
Those all used to be jobs performed by humans.
Amazon (NASDAQ: AMZN) is working incredibly hard right now to replace warehouse workers with robots. These robots can’t discuss philosophy or play chess — they’re “dumb.” But they can pick products and load trucks incredibly quickly 24/7.
This AI is coming soon to a warehouse near you.
Another huge misconception about AI is that computers are only coming for blue-collar jobs like warehouse workers and truck drivers.
Not true. We’re already seeing AI being used to perform work done by paralegals and even radiologists. This isn’t pie-in-the sky “one day computers will do this” stuff… It works now, better than highly trained humans in many cases.
Tesla (NASDAQ: TSLA) is a great example of a company that’s investing in cutting-edge AI at a rapid pace.
Lots of folks try to compare Tesla to other automakers. That’s a bit like only comparing General Electric to other companies that make washing machines. A massive swath of Tesla’s current sky-high valuation comes from its self-driving tech; stand-alone self-driving AI companies are worth hundreds of billions of dollars by themselves.
No doubt we’ll see other companies soar like Tesla has in the past year as investors wake up to the reality that their AI tech is worth far more than previously realized.
And they’re likely to pull the broad market higher along with them…
There are two big winners from AI right now: the research firms developing it and the ones applying it.
Companies like Tesla and Amazon do both.
If you want exposure to the industry without needing to know the nitty-gritty about what each and every company is doing, an AI- and autonomy-focused ETF is a good way to go. Two well-positioned examples are the ARK Autonomous Technology & Robotics ETF (BATS: ARKQ) and the iShares Robotics and AI ETF (NYSE: IRBO).
Stay tuned, big things are coming in this space.
Jonas Elmerraji, CMT