BofA Securities head of global thematic investing research Haim Israel notes that over the past 100 years, the equivalent of nearly 100 per cent of global net wealth has been created by only about 3 per cent of companies. He uses this remarkable data point to argue that the artificial intelligence field will provide the candidates for the 3 per cent that will drive wealth for the next century.
Mr. Israel highlights seven broad industries AI is set to transform: communications, health care, energy, transportation, mass user exposure to AI, computing and humanoid robots.
Some uses for AI will affect many of these industries. For instance, Google’s Deepmind AI has already uncovered more than 2.2 million crystal structures that could be used in materials science. This makes breakthroughs possible in areas like semiconductor density, solar panels, batteries and the development of neuromorphic computing that mirrors the functions of the human brain.
Mr. Israel has lofty expectations for computing power as he sees AI platforms, somewhat like an orchestra conductor, creating vast feedback loops with other technologies that spurs faster innovation.
There is significant (and for some people terrifying) development of AI-driven humanoid robots already underway. Figure AI’s Figure One robot is one example, Boston Dynamic’s Atlas is another, of AI helping create more functionality for robots.
Fanuc Corp., one the world’s largest robot manufacturers, has been developing AI-driven robots since 2016. Mr Israel writes, “[Advanced AI] gives robots the ability to teach themselves to do tasks faster and more efficiently. By learning together, what one robot can now do in eight hours could be done by eight robots in an hour.”
Miniature satellites, drug discovery (an AI platform has already found a drug treatment for liver cancer), and autonomous vehicles are three other areas where AI might soon have a dramatic effect.
Frustratingly for investors, Mr. Israel did not survey BofA equity analysts for stock ideas that will benefit from the expected waves of innovation that AI will create. Morgan Stanley attempted this in another research report that I featured on March 18 and recounted some of their ideas.
Mr. Israel made one observation that will certainly direct me in search of an AI-related investment. He estimates that AI will drive an increase in data generation from the current quintillion bytes per day to a sextillion. A massive increase in bandwidth will be needed to transmit this data. I am now actively searching for the companies that will provide the equipment necessary to handle this data increase.
-- Scott Barlow, Globe and Mail market strategist
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Stocks to ponder
Gildan Activewear Inc. (GIL-T) Is the stock worth US$42 a share? That’s the question investors are now pondering as the months-old leadership squabble at the Montreal-based T-shirt and apparel maker takes a new turn. The answer to Gildan’s valuation is potentially lucrative, given that the share price was struggling to rise above US$38 in New York last week. That’s US$4 below the price that what was floated as a potential takeover price. David Berman looks at what could be an interesting but still risky bet for investors.
The Rundown
This laggard dividend ETF stands out for its high yield and bounceback potential
Stocks have been strong lately, but a contingent of Canadian blue chips have been frozen out. One thing they have in common: They’re all Top 10 holdings in the $1.6-billion iShares Canadian Select Dividend Index ETF (XDV-T), which has a yield of 5.3 per cent. If you’re interested in capturing the yield of out-of-favour dividend stocks in a diversified way that limits risk somewhat, Rob Carrick says consider XDV.
Why a report on global happiness should worry Canadian investors
Investors who are looking for a new vantage point on the global economy should spend an hour with this year’s edition of the World Happiness Report, says Ian McGugan. The 2024 report points to two trends that should concern Canadian investors. The first is the lacklustre performance of Canada and the United States in terms of creating happiness. The second is the increasingly sour mood among young people in both countries.
Why interest-rate cuts and recession fears are short-term noise for investors
Many are obsessed these days with the possibility (or hope) of interest-rate cuts, the depth and timing of the next recession, the U.S. election and artificial intelligence. Of these, only AI, which has the potential to change how business is done, will have an important impact on long-term portfolio returns, says Tom Bradley.
Broadening U.S. market rally gets boost from dovish Fed
A reassuring economic outlook and dovish signals from the Federal Reserve are encouraging investors to look beyond the massive growth and technology stocks that have fueled the U.S. stock market’s gains over the past year. Though rallies in stocks such as Nvidia and Meta Platforms have been the market’s main individual drivers in 2024, the financials, industrials and energy sectors are also outperforming the S&P 500′s 9.7 per cent year-to-date gain. Lewis Krauskopf of Reuters tells us more.
Also see:
Oppenheimer most bullish in its year-end forecast for S&P 500
Goldman Sachs retains bullish view for commodities in 2024
Cocoa rally and market tumult hoist systematic hedge funds ahead of their peers
Record cocoa prices and markets whipped around by inflation and geopolitics helped hedge funds using systematic strategies outperform their peers in the first quarter, according to industry players and investors. A systematic hedge fund manager uses coding and algorithms to determine whether to find trades strong enough to become market trends, unlike traditional managers who decide the trade themselves.
Others (for subscribers)
The most oversold and overbought stocks on the TSX
Monday’s analyst upgrades and downgrades
Globe Advisor
Alternative strategies find a home in investors’ portfolios
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Ask Globe Investor
Question: I am interested in Costco Wholesale Corp. (COST-Q) as a potential investment. We shop there regularly and the place is always buzzing. The people working there seem happy, and the products we buy are of good quality. Over the years the stock has done well, and in 2023 it did extremely well. However, the dividend yield is not impressive. What are your thoughts?
Answer: Investing in companies whose products and services you are familiar with can be a profitable strategy. The legendary fund manager Peter Lynch endorsed this philosophy in his book, One Up on Wall Street, in which he popularized the phrase “invest in what you know.” Being a customer gives you insights that you might not otherwise have.
However, having a good experience with a company isn’t a sufficient reason to invest. You also need to investigate fundamentals such as the company’s earnings and revenue growth, competitive position and the stock’s valuation. Click here for my analysis on that front.
--John Heinzl (E-mail your questions to jheinzl@globeandmail.com)
What’s up in the days ahead
Should we just give up on that inverted yield curve that has so far proven to be less than effective in foreshadowing a recession? Veteran fund manager Tom Czitron will give us his thoughts.
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Compiled by Globe Investor Staff