James Cook CFA
Portfolio ManagerRead bio
2 min read • June 9, 2023
I’m sorry if I’ve ruined your next date night.
The market’s obsession with Artificial Intelligence (AI) is in the early stages of a rom-com movie. AI’s growth potential is undeniable as the market falls in love with all the possibilities.
Technology and computers are excellent at processing information and making complex tasks easy. Think about the amount of information your cell phone can process. Impressive.
AI’s ability to learn without human direction is the critical differentiator and a game-changer in how we interact with technology. Rather than asking for data to be processed, the computer will tell you the outcome—with minimal to zero human input. This growth trajectory is best thought about as exponential.
I know this sounds like a “there will be flying cars in the future” tangent, but imagine your phone making a reservation for your anniversary at your favourite restaurant. There is no need for you to tell the phone where to book and what the occasion is. You put on your best outfit, ready to enjoy the night out.
But how many companies use AI to improve sales, increase profit margins, and deliver more earnings to their shareholders? Very few. In most cases, the investment in AI is in its early stages, beta testing, if you will.
Company adoption of AI will change, but AI’s magic won’t deliver sweeping fundamental improvements tomorrow. It will take time for businesses to learn how to leverage and deploy this technology effectively. Maybe less time than past technological advancements, but time nonetheless. Companies that fail to adapt will face heartache.
An investment process focused on fundamentals will benefit you as companies successfully integrate AI, and Q2/ 2022 innovation in AI materializes. Our investment team’s long-term relationship with our investment process has helped us buy companies like Microsoft, Applied Materials, Mastercard, ADP, Paychex, and Accenture. These companies have initiated steps to tackle AI integration and innovation.
Markets have been in and out of love with large technology companies over the last three years. There was a fight with large tech companies throughout 2022, which is over for now, and markets have made up and are back in love with large tech.
Investors are adding more technology to their portfolios, with the Nasdaq up 33% year-to-date. It’s a performance that’s undoubtedly been compelling this year.
While the year-to-date return looks attractive, the journey of a longer-term investment is bumpy. An investor must assess if they can handle the volatility.
Portfolio ManagerRead bio
delivered to your inbox once a month