WEBVTT - How to Invest in AI Right Now

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<v Speaker 1>Bloomberg, Audio Studios, podcasts, radio news.

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<v Speaker 2>Another week, another title weight of AI news, major investments.

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<v Speaker 3>The Disney story, a billion dollar investment from this iconic

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<v Speaker 3>from the House of Mouse in open AI.

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<v Speaker 2>And some significant share drops.

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<v Speaker 1>Oracle sank fourteen percent.

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<v Speaker 3>Investors are worried about whether all the money Oracle is

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<v Speaker 3>spending on AI technology will pay off.

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<v Speaker 2>There's an enormous amount of money flowing in and out

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<v Speaker 2>of the AI industry right now.

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<v Speaker 4>It's just such an all encompassing, all pervasive theme.

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<v Speaker 2>Suzanne Woolley covers personal finance for Bloomberg.

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<v Speaker 4>It's what everyone's talking about, It's what everyone's worried about.

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<v Speaker 3>We've heard a lot of promise, but not a lot

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<v Speaker 3>of actual revenue coming from the companies that are spending

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<v Speaker 3>so much on building out AI. If a few of

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<v Speaker 3>these big AI hyperscalers have a bit of a hiccup,

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<v Speaker 3>we could see a lot of the other market taken

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<v Speaker 3>down with them.

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<v Speaker 2>Every few weeks, Suzanne asks experts to share their advice

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<v Speaker 2>about where people should be investing their money. And right now,

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<v Speaker 2>you'd be hard pressed to find a company or a

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<v Speaker 2>sector to invest in that isn't AI exposed.

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<v Speaker 4>It's a little hard for me to think of a

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<v Speaker 4>pure investment where AI wouldn't at least be embedded in

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<v Speaker 4>the operations of a company.

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<v Speaker 2>So Suzanne and I called up some investment experts to

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<v Speaker 2>help assess when, whether and how to bet on AI

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<v Speaker 2>in the most strategic way possible. Because things are moving quickly,

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<v Speaker 2>and alongside all the excitement about getting in on the

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<v Speaker 2>AI race, there are also a lot of concerns about

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<v Speaker 2>being too exposed. I'm Sarah Holder, and this is the

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<v Speaker 2>big take from Bloomberg News Today. On the show The

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<v Speaker 2>Risks and Rewards of Investing in AI right Now, we

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<v Speaker 2>talk to investment experts about what they think are the

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<v Speaker 2>smartest AI plays and the ones you should avoid, depending

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<v Speaker 2>on who you talk to. AI is poised to revolutionize

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<v Speaker 2>healthcare and technology or destroy jobs and natural resources. It's

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<v Speaker 2>the most profitable investment opportunity we've ever seen, or an

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<v Speaker 2>industry bubble that's about to burst. Suzanne said, the topic

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<v Speaker 2>stirs up a lot of anxiety.

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<v Speaker 4>We know it feels transformative and we're seeing big changes,

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<v Speaker 4>but we can't look out ten years from now with

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<v Speaker 4>any sort of crystal ball and say these are the

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<v Speaker 4>stocks I should have invested in and you know this

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<v Speaker 4>is how it's going to reshape finance or insurance or journalism.

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<v Speaker 4>We're seeing it in our personal lives when we read

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<v Speaker 4>about stories of like layoffs and the entry level jobs.

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<v Speaker 4>So there is this sort of excitement over the promise,

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<v Speaker 4>but worry over the impact on one's life and just

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<v Speaker 4>the uncertainty about what it might lead to.

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<v Speaker 2>I mean, does that remind you of any other sorts

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<v Speaker 2>of investments that you've written about. I guess, like the

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<v Speaker 2>dot com bubble, investing in tech stocks back in the

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<v Speaker 2>early aughts.

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<v Speaker 4>That kind of enthusiasm and the fear about hype and

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<v Speaker 4>all the bubble talk is reminiscent of those times. But

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<v Speaker 4>I feel like with AI it's sort of that on

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<v Speaker 4>steroids in a way. It's seen as a much bigger,

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<v Speaker 4>potentially life altering breakthrough for.

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<v Speaker 2>The AI bulls. That's exactly the reason to put your

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<v Speaker 2>money behind it.

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<v Speaker 4>Getting in now and riding this wave is how you're

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<v Speaker 4>going to make the big money going forward. We've seen

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<v Speaker 4>incredible valuations on companies connected to AI, and that is

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<v Speaker 4>where you get into sort of the bearcase. The cons

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<v Speaker 4>people are worried about these valuations. There's waves, massive waves

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<v Speaker 4>of money flowing into building out the infrastructure and the

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<v Speaker 4>data centers to support AI. Can the industry grow into

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<v Speaker 4>all of the money that's being spent on it.

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<v Speaker 2>That's unclear for a lot of investors, though the idea

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<v Speaker 2>of all this untapped potential makes this moment feel like

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<v Speaker 2>the perfect time to strike.

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<v Speaker 1>I have never seen more fear about innovation than I

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<v Speaker 1>do now, and I'm very comfortable here. I think this

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<v Speaker 1>is a good place. You know, you don't chase the momentum,

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<v Speaker 1>but you buy the dip because you get these opportunities.

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<v Speaker 2>That's Kathy Wood, the CEO of ARC invest She's someone

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<v Speaker 2>who's investments are closely watched by retail investors, so when

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<v Speaker 2>Suzanne was looking for experts to pull, she wanted to

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<v Speaker 2>go to Kathy first.

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<v Speaker 4>She has such an interesting history in investing in innovative

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<v Speaker 4>technology g companies.

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<v Speaker 2>Kathy said that as she tracks the number of users

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<v Speaker 2>of open ai and Gemini, she's reminded of the early

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<v Speaker 2>days of the dot com boom.

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<v Speaker 1>If you think about the Internet and how it evolved,

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<v Speaker 1>we think we are in nineteen ninety five. For the consumer.

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<v Speaker 2>The hope is that as the user base grows so

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<v Speaker 2>will the money that she's invested in companies leveraging AI,

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<v Speaker 2>like one of Kathy's longtime favorites, Tesla.

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<v Speaker 1>It is the robotaxi year. We believe that the autonomous

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<v Speaker 1>taxi ecosystem globally is going to scale right now. I

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<v Speaker 1>think if it's in the billions, I'd be surprised in

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<v Speaker 1>terms of revenue generation. But we think it's going to

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<v Speaker 1>scale to the eight to ten trillion dollar level per

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<v Speaker 1>year within the next five to ten years.

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<v Speaker 2>Investing in a highly valued MAG seven tech company like

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<v Speaker 2>Tesla or Nvideo or Microsoft isn't the only way to

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<v Speaker 2>bet on AI's potential, though. Tasha Wang, a portfolio manager

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<v Speaker 2>for Fidelity International based in Hong Kong, suggests looking at

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<v Speaker 2>the infrastructure that supports the AI ambitions of MAG seven businesses.

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<v Speaker 5>For example, semiconductor, you know you can easily access it

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<v Speaker 5>via ETF and it's something that you know it's a

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<v Speaker 5>structural growth story even before AI.

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<v Speaker 2>In addition to physical technologies like semiconductors, Tasha said, investors

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<v Speaker 2>should be thinking about the underlying commodities that tech relies on.

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<v Speaker 2>With finite supplies, but the prospect of increasing demand, we

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<v Speaker 2>can be.

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<v Speaker 5>Talking about copper, and we can be talking about things

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<v Speaker 5>like uranium. You know that's not traditionally on the radar

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<v Speaker 5>of commality investors, but nuclear is such an important way

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<v Speaker 5>to power the AI power needs.

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<v Speaker 2>Our third expert agreed that anything related to power is interesting.

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<v Speaker 6>That is the bottleneck right now.

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<v Speaker 2>Michael Smith, who runs the Growth equity team at all

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<v Speaker 2>Spring Global Investments.

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<v Speaker 6>When you look at the commitments that have already been

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<v Speaker 6>announced from the major players in the space and add

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<v Speaker 6>it all up between now and twenty thirty, they need

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<v Speaker 6>to obtain enough power to fuel basically the equivalent of

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<v Speaker 6>thirty to thirty five million homes, which to put that

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<v Speaker 6>in perspective, they are over one hundred and thirty million

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<v Speaker 6>households in the US today.

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<v Speaker 2>But Michael also advised being more forward looking in predicting

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<v Speaker 2>where AI is going next.

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<v Speaker 6>To use the surfing analogy. Don't chase the wave that's

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<v Speaker 6>already passed. Get ready for the next one. If you

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<v Speaker 6>miss the infrastructure wave and you feel like it's too

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<v Speaker 6>late to buy Nvidia, don't worry. I think the next

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<v Speaker 6>big wave will probably be the suppliers, the B to

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<v Speaker 6>B companies that develop applications and tools that they sell

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<v Speaker 6>to other businesses and help them use AI. And then

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<v Speaker 6>if if you miss that wave or you're not comfortable

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<v Speaker 6>with that, I think there's a huge wave coming behind them,

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<v Speaker 6>the supplier wave, which will be the consumers of all

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<v Speaker 6>this stuff. And when AI starts to directly improve everyday

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<v Speaker 6>experiences for all of us, that there's going to be

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<v Speaker 6>big opportunities.

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<v Speaker 2>Another way to think about categorizing AI related investment opportunities

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<v Speaker 2>comes from Denny Fish, who's head of Technology research and

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<v Speaker 2>a portfolio manager at Janis Henderson.

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<v Speaker 4>Denny Fish use the buckets of enabler, enhancer, and us

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<v Speaker 4>there we're.

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<v Speaker 3>Going to see waves of adoption and evolution. We are

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<v Speaker 3>clearly in the enablement phase of AI and the infrastructure

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<v Speaker 3>build out, and that's semis and that's power, data center infrastructure,

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<v Speaker 3>all those things that you need to even be able

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<v Speaker 3>to train a model or perform inference.

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<v Speaker 2>In this enablement phase, Companies like Microsoft or Amazon, which

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<v Speaker 2>have major cloud computing businesses are seeing massive growth. So

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<v Speaker 2>are those physical infrastructure providers companies that manufacture chips or

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<v Speaker 2>use liquid cooling systems for data centers. Denny Fish's next

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<v Speaker 2>category is the enhancers.

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<v Speaker 3>There will be companies that will embrace AI in a

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<v Speaker 3>meaningful way to improve their competitive position in areas like

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<v Speaker 3>software and internet.

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<v Speaker 2>Tech companies like into It, which dominates in accounting and

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<v Speaker 2>tax e filing and is trying to use AI to

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<v Speaker 2>improve its product. And finally, there are end users, non

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<v Speaker 2>tech companies that adopt AI early.

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<v Speaker 4>A more sort of motley crew of companies that can

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<v Speaker 4>incorporate AI to have a more competitive edge and operations

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<v Speaker 4>in using agentic AI just really sort of deepening the

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<v Speaker 4>reach of their business and becoming more relevant to their customers.

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<v Speaker 3>You could listen to the transcript of every company in

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<v Speaker 3>the S and P five hundred last quarter, right and

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<v Speaker 3>I don't know, sixty seventy percent of them mention artificial

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<v Speaker 3>intelligence in their transcript. So you can go through and

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<v Speaker 3>pick your poison in financial services, healthcare, agriculture, insurance and

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<v Speaker 3>find unique companies that are actually benefiting from this trend

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<v Speaker 3>that aren't quite as obvious.

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<v Speaker 2>Take John Deere, the agricultural services company that's using AI

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<v Speaker 2>to identify which weeds and plants to spray, or healthcare

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<v Speaker 2>companies like tempess AI, which uses the technology to analyze

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<v Speaker 2>patient data to improve disease diagnosis. And treatment. Here's Kathy

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<v Speaker 2>Wood again.

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<v Speaker 1>That's in our top ten, which we think could become

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<v Speaker 1>one of the most important healthcare information backbones in the

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<v Speaker 1>United States.

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<v Speaker 2>But what happens if all the plans to make AI

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<v Speaker 2>profitable don't pan out exactly the way these companies have promised?

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<v Speaker 2>How to head your bets after the break. The amount

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<v Speaker 2>of money going into the AI space right now is

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<v Speaker 2>frankly staggering.

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<v Speaker 6>The current run rate spendings of the big hyperscaler companies

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<v Speaker 6>alone equals like ten Manhattan projects.

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<v Speaker 2>Michael Smith at all Spring.

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<v Speaker 6>Pretty much AI has to work like we're all in.

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<v Speaker 6>It is a massive percentage of the stock market.

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<v Speaker 5>I think we all sort of in awe of how

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<v Speaker 5>much money is going in right that. The magnitude order

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<v Speaker 5>of magnitude is hundreds of billions of dollars, and they

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<v Speaker 5>are big, they're GDP moving kind of numbers.

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<v Speaker 2>Taosha Wang at Fidelity believes it makes sense that investment

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<v Speaker 2>at this scale would drive GDP.

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<v Speaker 5>But after that, the boost you know, through investment, needs

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<v Speaker 5>to come from productivity. King and productivity is also an

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<v Speaker 5>important driver of GDP. We are seeing anecdotal evidence of

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<v Speaker 5>you know, certain industries really benefiting from the adoption of

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<v Speaker 5>AI in terms of the productivity boost. But you know,

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<v Speaker 5>for us to be broad economy GDP moving that we

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<v Speaker 5>need to see it in many different industries that may

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<v Speaker 5>not necessarily traditionally at the forefront of technology.

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<v Speaker 2>That wide scale adoption and proven profitability are what Tashaw

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<v Speaker 2>believes will determine whether the AI run up continues or

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<v Speaker 2>whether it's more like a bubble that could pop.

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<v Speaker 5>One can never time haul on the bubble is going

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<v Speaker 5>to last and what is going to make the bubble

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<v Speaker 5>burst and make the music stop. I think it's usually

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<v Speaker 5>related to liquidity and cash flow. So to the extent

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<v Speaker 5>that there's still money going around, then I think it

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<v Speaker 5>can continue.

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<v Speaker 2>Those bubble concerns are being driven in part by the

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<v Speaker 2>large number of circular investment deals in this space. In

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<v Speaker 2>other words, companies like open ai, Video and Microsoft all

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<v Speaker 2>investing in each other. The fear is that it's those

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<v Speaker 2>deals that are propping up the industry's growth and valuations.

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<v Speaker 2>But Tasha is among the experts who say mutual investments

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<v Speaker 2>aren't a reason to write the whole industry off.

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<v Speaker 5>I think it's not necessarily a brand new practice that

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<v Speaker 5>you know companies invest in other companies that are in

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<v Speaker 5>their operational sort of sphere.

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<v Speaker 2>But she also says it is reason for investors to

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<v Speaker 2>take care.

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<v Speaker 5>I would generally caution against things from a cash flow

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<v Speaker 5>perspective that do not have, you know, real revenue prove,

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<v Speaker 5>real profitability proof. Alarming amount of circular investments going on.

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<v Speaker 5>That's certainly something that you know, want to be mindful of.

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<v Speaker 2>Michael Smith has been on his team at All Springs

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<v Speaker 2>since the dot com boom and bust, and there's a

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<v Speaker 2>few things he learned from that experience.

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<v Speaker 6>There are a lot of companies that want a piece

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<v Speaker 6>of this pie, and to me, like the big difference

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<v Speaker 6>is who's funding their investments from the profits that their

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<v Speaker 6>legacy businesses generate, and who's dependent on the kindness of strangers,

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<v Speaker 6>whether it would be outside equity investors, lenders, anybody who's

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<v Speaker 6>helping to finance the growth other than the business itself,

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<v Speaker 6>and just be very careful investing in companies that can't

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<v Speaker 6>finance their own growth. I think that was the lesson

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<v Speaker 6>learned in the late nineties and early two thousands. I mean,

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<v Speaker 6>it was basically the inability to access the capital markets

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<v Speaker 6>and continue to finance the growth that changed things that

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<v Speaker 6>time around.

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<v Speaker 2>As you may have noticed, the investment experts we spoke

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<v Speaker 2>to tended to be bullish on AI. They've already bet

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<v Speaker 2>on the industry themselves, after all. When we asked Kathy

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<v Speaker 2>would if there were any AI related investments she'd caution against,

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<v Speaker 2>she said, basically, don't move on to the next thing

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<v Speaker 2>too quickly.

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<v Speaker 1>A lot of people are saying, well, you know, this

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<v Speaker 1>AI movement or opportunity is exploited. Let's move to the

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<v Speaker 1>next thing, which is quantum computing. They've skipped over thematically

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<v Speaker 1>to quantum because they think and I say they meaning

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<v Speaker 1>thematic portfolio teams or what have you. They think AI

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<v Speaker 1>has been exploited. We think it's barely begun.

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<v Speaker 2>To read more about what these investment experts told Bloomberg

0:15:13.200 --> 0:15:16.960
<v Speaker 2>Personal Finance reporter Susan Woolley, head to Bloomberg dot com

0:15:17.080 --> 0:15:28.200
<v Speaker 2>or click the link in our show notes. This is

0:15:28.280 --> 0:15:31.560
<v Speaker 2>the Big Take from Bloomberg News. I'm Sarah Holder. The

0:15:31.600 --> 0:15:35.040
<v Speaker 2>show is hosted by Me, David Gera, and Wanha. The

0:15:35.080 --> 0:15:39.200
<v Speaker 2>show is made by Aaron Edwards, David Fox, Eleanor Harrison, Dengate,

0:15:39.560 --> 0:15:45.120
<v Speaker 2>Patti Hirsch, Rachel Lewis Krisky, Naomi Julia Press, Tracy Samuelson,

0:15:45.280 --> 0:15:51.520
<v Speaker 2>Naomi Shaven, alex Udiura, Julia Weaver, Yangyong and Taka Yasuzawa.

0:15:51.600 --> 0:15:54.280
<v Speaker 2>To get more from the Big Take and unlimited access

0:15:54.320 --> 0:15:57.880
<v Speaker 2>to all of bloomberg dot Com, subscribe today at Bloomberg

0:15:57.920 --> 0:16:01.440
<v Speaker 2>dot Com Slash Podcast Offer. Thanks for listening. We'll be

0:16:01.480 --> 0:16:04.680
<v Speaker 2>back on Monday.