by Bryan Perry
June 18, 2024
This past week of trading activity brought with it several new developments that have stoked uncertainty in a number of sectors. Last week’s sequential trading sessions revealed a narrowing of market leadership, offering, in my view, good cause to rotate heavily into the AI trade, which I believe is a generational wealth-building opportunity currently underway, at the expense of just about every other market sector.
Sometimes it pays to spend nearly all of one’s due diligence efforts on a secular wave that can add multiples to one’s net worth. The AI revolution is as big as the rollout of the Internet and, with the right stocks, investors can amass a fortune from the largest wave of IT spending of all time. Fortunes are made by being heavily weighted in stocks of companies that will profit from these massive inflows of spending.
The IDC Worldwide Artificial Intelligence Guide shows that by the end of this year companies will have spent 26.5% more on AI tools than the same time last year, and this rate of annual growth is expected to continue through to 2026. Mike Glennon, senior market research analyst with IDC’s Customer Insights & Analysis team, said, “Companies that are slow to adopt AI will be left behind – large and small.” He further clarified that, “AI is best used in these companies to augment human abilities, automate repetitive tasks, provide personalized recommendations and make data-driven decisions with speed and accuracy.”
AI spending is projected to double to over $300 billion by 2026. The U.S. will be the largest market for AI systems, with more than 50% of all AI-centric spending. Western Europe will account for about 20% but will have the fastest growth rates for the period at a CAGR of 30% over the five-year period.
News flash! Almost halfway through 2024, capital spending on AI is already approaching 2026 forecasts.
Spending is accelerating in a wave AI “FOMO,” where if your company doesn’t have a state-of-the-art AI platform in place, you may as well order the last words to be etched on your corporate tombstone. It is forecasted that somewhere between $1 trillion and $2 trillion will be invested in AI in all forms by 2030 and that, in all its applications, AI will contribute some $15.7 trillion to the global economy by 2030.
Market size and revenue for artificial intelligence worldwide from 2020 to 2030
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The numbers are staggering, but this spending wave is still happening in a “stealth” bull market. The AI market doesn’t care about the U.S. elections, strife in the Middle East or Ukraine, climate change, political upheaval in Europe, or anything else. This is a new and brazen battleground of “survival of the fittest” among the mightiest companies in the world – to gain the necessary advantage to maintain and gain market share.
Investors should never lose sight of what makes the economic world go around: It is pure capitalism at its finest. It’s what makes the world incredibly more efficient, so that a greater percentage of humanity may have a better life. AI is like air conditioning being introduced for the first time to millions of struggling workers and companies around the world trying to find a way to generate profits for the very first time.
You either make your company better because of AI or you get passed by. There are three types of people – those who make things happen, those who watch things happen, and those who wonder what happened.
This is no time for investors to sit idly by with a “fully diversified” portfolio – invested in “emerging” markets (that never seem to emerge, but only get hammered), or Euro-trash stocks, pigeon-holed by a monumental shift in political sentiment that will ultimately result in parliamentary chaos in a number of key countries, or in China’s weak economic recovery masked in an opaque shadow-banking turmoil that will ultimately lead to widespread financial demise due to over-regulated industries, or many other market sectors that are seeing negative money flow because the smart money is going all in on the AI revolution.
Big-cap AI-driven tech is the “here and now” move for portfolios and – out of respect for our compliance department – I won’t list the stocks that may lead the AI charge – but there are roughly 20 stocks that are all one needs to be highly overweighted in AI for years ahead. (Louis Navellier has already named a few).
Between their blowout earning reports, higher earnings guidance, substantial stock buybacks announced and stock splits for a few of key leadership stocks, big cap AI tech-centric stocks should be the primary focus of investors’ capital commitments while this wave the size of the Waimea Bay pipeline breaks.
There is over $6 trillion dollars in dry powder sitting in high-yielding money markets that have yet to commit to this raging bull market in AI. It will come, and when it does, valuations will go parabolic, and it will be a perfect time to sell into that euphoric strength, count your chips and blessings that you were in on this move, and take your best friend out to dinner. As with most technological disruptive mega-waves, those stocks that stand to benefit the most get priced to over-perfection before the spending wave matures.
It will likely be that big, and quite frankly, the AI trade seems woefully under-owned at the present.
All content above represents the opinion of Bryan Perry of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Powell Needs to Face Reality – and Take Control
Income Mail by Bryan Perry
The Market Just Got Real Simple, Real Fast, For Most Investors
Growth Mail by Gary Alexander
The Data-Dependent Fed Relies on Deceptive Data to Meet its Misleading Mandates
Global Mail by Ivan Martchev
Beware the Franco-German Spread
Sector Spotlight by Jason Bodner
While in Europe, I Take a Closer Look at Travel & Leisure Stocks
View Full Archive
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Bryan Perry
SENIOR DIRECTOR
Bryan Perry is a Senior Director with Navellier Private Client Group, advising and facilitating high net worth investors in the pursuit of their financial goals.
Bryan’s financial services career spanning the past three decades includes over 20 years of wealth management experience with Wall Street firms that include Bear Stearns, Lehman Brothers and Paine Webber, working with both retail and institutional clients. Bryan earned a B.A. in Political Science from Virginia Polytechnic Institute & State University and currently holds a Series 65 license. All content of “Income Mail” represents the opinion of Bryan Perry
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