Making gains in AI isn’t as easy anymore … the AI company in Eric Fry’s crosshairs … how Luke Lango is playing AI today … the AI tool Louis Navellier likes for investors
Finding cutting-edge AI plays that can become market-leading AI stocks is not easy.
It is not the proverbial “shooting fish in a barrel” process; it is more like grabbing cobras from a basket.
So says our macro expert, Eric Fry of Investment Report.
As you’re likely aware, 2023 has been the year of artificial intelligence (AI). You’ve either been in AI-related stocks and made money, or your portfolio has likely done nothing.
But the market here in late-June is quite different than the market back in January.
For one, the Nasdaq 100 is now 37% more expensive.
Two, many of the most obvious AI stocks have doubled in price, if not more. For instance, C3.ai soared roughly 315% before its recent pullback to gains of “just” 244% as I write Thursday morning.
Three, many investors are paying little attention to the core business and profitability behind their AI stock investments.
As Eric writes:
Many of the “pure-play” AI companies are producing sizeable losses and offer a lot more hope than substance.
Secondly, the AI initiatives at many established companies are so early in their development that they will not boost overall profit growth any time soon.
So, what’s the best AI play today in light of these realities?
Let’s answer by looking at how each of our InvestorPlace analysts, Eric, Luke Lango, and Louis Navellier, are positioning their subscribers in AI.
Eric is eyeing a former tech darling that’s fallen off the radar of most investors
Way down on the list of “top AI stocks” for most investors (potentially not even on the list) is Intel.
If you were watching the news headlines yesterday, you saw that Intel led the Dow Jones lower – for the second straight day.
Clearly, Wall Street doesn’t like something about Intel. But it’s this “something” that has caught Eric’s eye. And he believes that overlooking this once-upon-a-time tech blue-chip could be a big mistake.
Here’s Eric explaining Wall Street’s beef with the chipmaker:
Intel has embarked on an expensive and risky strategy to build next-generation semiconductor foundries here in the U.S. Almost no one seems to like this idea, other than Intel’s CEO Pat Gelsinger.
But I side with Gelsinger. I applaud the strategy as a cunning, long-term play on AI dominance. That’s right, Intel could be a deeply discounted AI play that’s hiding in plain sight.
While this foundry strategy will be astronomically expensive, Eric writes that it will “jump” five entire generations of chip-making technology.
Back to Eric:
No one has attempted a leap of this magnitude since Evel Knievel jumped his motorcycle over the fountain at Caser’s Palace in 1967. Evel came up a little short that day – breaking 40 bones in the process and lying in a coma for a month.
Intel’s giant leap could achieve a similar outcome, which is why many investors are steering clear of the stock. But I don’t anticipate any broken bones or comas for Intel, only a “surprising” success.
And on the topic of valuation, as you can see below, while Intel shares have climbed this year (25% as I write), they remain miles beneath the gains from competitors AMD (75%) and Nvidia (196%).
If you want a deeper dive into AI, Eric recently visited the birthplace ChatGPT in San Francisco. It was part of his research video profiling this cutting-edge technology, as well as what investors should be doing about it today. You can watch it free right here.
Meanwhile, our hypergrowth specialist Luke Lango has invested in AI across multiple sectors, but is zeroing in on small self-driving car companies
As our technology expert, Luke has been all over the AI-stock-surge this year. In fact, as of last week, Luke’s Core Portfolio in Innovation Investor was up 57% year-to-date. His goal for 2023 is a portfolio return of 100%, which appears like it might be too low at the current pace. A congrats to all the Innovation Investor subscribers who have enjoyed one heck-of-a 2023 so far.
Given that Luke’s research has identified AI opportunities spanning multiple sectors, what is he buying now?
Before we answer that, let’s first clarify the type of AI company he urges readers to focus on – small-cap plays. That’s because their return-potential dwarfs what you might see from the huge mega-cap stocks.
We believe companies like Microsoft and Apple will integrate sophisticated AI throughout their ecosystem of products. And chipmakers like Nvidia will see a huge uptick in demand for its GPUs to power next-gen AI systems.
However, those are multi-hundred-billion-dollar, even trillion-dollar companies. Even if their AI applications create trillion-dollar empires – which is totally possible but also a best-case outcome – their stocks would only rise, say, 100% to 200%, versus 1000% for a smaller company.
Why? Because of the “small firm effect.”
It boils down to simple math. It’s easier for a small company to double its revenues from $10 million to $20 million than a massive company to double its revenues from $10 billion to $20 billion.
Plus, as Luke points out, small-cap stocks often have lower nominal stock prices, which makes it easier to double from, say, $2 to $4 than a mega-cap stock doubling from $200.
Back to Luke:
The AI Revolution represents one of those once-in-a-lifetime investment opportunities where 1,000% and even 10,000% returns are entirely possible.
With opportunities that big available, we shouldn’t settle for 100% winners. We should think bigger.
Beyond smaller companies, Luke believes top-tier AI stocks related to the self-driving car megatrend still offer big return potential
Here’s Luke explaining AI’s role in self-driving cars:
A car is outfitted with sensors and cameras. Those sensors and cameras collect data about the car’s surroundings.
That data is processed by an AI system, which it uses to make real-time decisions. And those decisions ultimately determine whether the car accelerates, brakes, changes lanes, turns, etc.
AI is the “engine” of the self-driving car.
Therefore, it is no coincidence that at the same time we are seeing all this hype about AI and ChatGPT, we are finally starting to see self-driving cars on the road.
Luke details how Big Tech is already heavily involved here. You have everyone from Alphabet, to Apple, Uber, Mercedes-Benz, Tesla, Volvo, BMW, Volkswgen… You name it, they’re all in the game.
But again, Luke likes the small-cap plays because of their greater return potential:
Year-to-date, self-driving car stocks have soared anywhere from 5% to 100%, with the average return in some of our favorite self-driving car stocks we track being about 47%.
While I can’t share the names of Luke’s recommended stocks, I can point you toward three ETFs as a starting point for your own AI self-driving car research.
Check out the KraneShares Electric Vehicles and Future Mobility ETF (KARS), the Global X Autonomous & Electric Vehicles ETF (DRIV), and the Capital Link Global Green Energy Transport and Technology Leaders ETF (EKAR).
Look at the specific holdings of each ETF, focusing in on small-cap companies with an emphasis on AI.
For more of Luke’s AI research and recommendation in Innovation Investor, click here.
Finally, legendary investor Louis Navellier is getting behind our corporate partner, TradeSmith, and its new, astonishingly accurate AI platform
You don’t have to invest in AI – you can simply use AI to make better investments.
That’s the theory behind TradeSmith’s new AI-tool “An-E” (short for Analytical Engine).
If you’re new to the Digest, TradeSmith is our corporate partner and also one of the preeminent AI companies in the investment industry. And on Tuesday night, their CEO Keith Kaplan sat down with our own Louis Navallier to pull back the curtain on AI investing and introduce An-E (pronounced “Annie”), the AI tool that could put you ahead of 99% of other investors.
It turned into an enormous event, with thousands of investors tuning in to see exactly what An-E is, and how it works.
Here’s Keith providing an overview:
With incredible computing power and AI at our fingertips, our team embarked on the most important research project in our company’s history… one that could help you make much bigger stock market returns than you’re making now, while taking less risk…
We call this “Project An-E” (pronounced Annie).
It took us a while to get to the point where we could reliably trust An-E to predict a stock’s future price action.
But it was all worth it, because what makes An-E so powerful is that through all this training and development, humans aren’t the ones setting the parameters. Humans are prone to errors and bias, and our fallibility can skew the results.
An-E doesn’t have biases.
It’s designed to create its own optimal parameters based purely on getting a desired result: helping folks make money and avoid taking unnecessary risks.
We’re running long in today’s Digest, but I encourage you to watch a free replay of Tuesday’s AI event with Keith and Louis by clicking here.
You’ll even see Keith and Louis reveal An-E’s predictions of the stock prices of NVDA, AAPL, and SYM – all completely free. There’s also the results of An-E’s back-tests on loads of other stocks.
Big picture, making money from the AI trade is no longer the bonanza it was in January, but there are still gains to be had. Check out Intel… small-cap self-driving-car plays… and An-E.
We’ll keep you updated with our analysts’ latest research here in the Digest.
Have a good evening,