Speaker 1: Bloomberg, Audio Studios, podcasts, radio news.
Speaker 2: Another week, another title weight of AI news, major investments.
Speaker 3: The Disney story, a billion dollar investment from this iconic
Speaker 3: from the House of Mouse in open AI.
Speaker 2: And some significant share drops.
Speaker 1: Oracle sank fourteen percent.
Speaker 3: Investors are worried about whether all the money Oracle is
Speaker 3: spending on AI technology will pay off.
Speaker 2: There's an enormous amount of money flowing in and out
Speaker 2: of the AI industry right now.
Speaker 4: It's just such an all encompassing, all pervasive theme.
Speaker 2: Suzanne Woolley covers personal finance for Bloomberg.
Speaker 4: It's what everyone's talking about, It's what everyone's worried about.
Speaker 3: We've heard a lot of promise, but not a lot
Speaker 3: of actual revenue coming from the companies that are spending
Speaker 3: so much on building out AI. If a few of
Speaker 3: these big AI hyperscalers have a bit of a hiccup,
Speaker 3: we could see a lot of the other market taken
Speaker 3: down with them.
Speaker 2: Every few weeks, Suzanne asks experts to share their advice
Speaker 2: about where people should be investing their money. And right now,
Speaker 2: you'd be hard pressed to find a company or a
Speaker 2: sector to invest in that isn't AI exposed.
Speaker 4: It's a little hard for me to think of a
Speaker 4: pure investment where AI wouldn't at least be embedded in
Speaker 4: the operations of a company.
Speaker 2: So Suzanne and I called up some investment experts to
Speaker 2: help assess when, whether and how to bet on AI
Speaker 2: in the most strategic way possible. Because things are moving quickly,
Speaker 2: and alongside all the excitement about getting in on the
Speaker 2: AI race, there are also a lot of concerns about
Speaker 2: being too exposed. I'm Sarah Holder, and this is the
Speaker 2: big take from Bloomberg News Today. On the show The
Speaker 2: Risks and Rewards of Investing in AI right Now, we
Speaker 2: talk to investment experts about what they think are the
Speaker 2: smartest AI plays and the ones you should avoid, depending
Speaker 2: on who you talk to. AI is poised to revolutionize
Speaker 2: healthcare and technology or destroy jobs and natural resources. It's
Speaker 2: the most profitable investment opportunity we've ever seen, or an
Speaker 2: industry bubble that's about to burst. Suzanne said, the topic
Speaker 2: stirs up a lot of anxiety.
Speaker 4: We know it feels transformative and we're seeing big changes,
Speaker 4: but we can't look out ten years from now with
Speaker 4: any sort of crystal ball and say these are the
Speaker 4: stocks I should have invested in and you know this
Speaker 4: is how it's going to reshape finance or insurance or journalism.
Speaker 4: We're seeing it in our personal lives when we read
Speaker 4: about stories of like layoffs and the entry level jobs.
Speaker 4: So there is this sort of excitement over the promise,
Speaker 4: but worry over the impact on one's life and just
Speaker 4: the uncertainty about what it might lead to.
Speaker 2: I mean, does that remind you of any other sorts
Speaker 2: of investments that you've written about. I guess, like the
Speaker 2: dot com bubble, investing in tech stocks back in the
Speaker 2: early aughts.
Speaker 4: That kind of enthusiasm and the fear about hype and
Speaker 4: all the bubble talk is reminiscent of those times. But
Speaker 4: I feel like with AI it's sort of that on
Speaker 4: steroids in a way. It's seen as a much bigger,
Speaker 4: potentially life altering breakthrough for.
Speaker 2: The AI bulls. That's exactly the reason to put your
Speaker 2: money behind it.
Speaker 4: Getting in now and riding this wave is how you're
Speaker 4: going to make the big money going forward. We've seen
Speaker 4: incredible valuations on companies connected to AI, and that is
Speaker 4: where you get into sort of the bearcase. The cons
Speaker 4: people are worried about these valuations. There's waves, massive waves
Speaker 4: of money flowing into building out the infrastructure and the
Speaker 4: data centers to support AI. Can the industry grow into
Speaker 4: all of the money that's being spent on it.
Speaker 2: That's unclear for a lot of investors, though the idea
Speaker 2: of all this untapped potential makes this moment feel like
Speaker 2: the perfect time to strike.
Speaker 1: I have never seen more fear about innovation than I
Speaker 1: do now, and I'm very comfortable here. I think this
Speaker 1: is a good place. You know, you don't chase the momentum,
Speaker 1: but you buy the dip because you get these opportunities.
Speaker 2: That's Kathy Wood, the CEO of ARC invest She's someone
Speaker 2: who's investments are closely watched by retail investors, so when
Speaker 2: Suzanne was looking for experts to pull, she wanted to
Speaker 2: go to Kathy first.
Speaker 4: She has such an interesting history in investing in innovative
Speaker 4: technology g companies.
Speaker 2: Kathy said that as she tracks the number of users
Speaker 2: of open ai and Gemini, she's reminded of the early
Speaker 2: days of the dot com boom.
Speaker 1: If you think about the Internet and how it evolved,
Speaker 1: we think we are in nineteen ninety five. For the consumer.
Speaker 2: The hope is that as the user base grows so
Speaker 2: will the money that she's invested in companies leveraging AI,
Speaker 2: like one of Kathy's longtime favorites, Tesla.
Speaker 1: It is the robotaxi year. We believe that the autonomous
Speaker 1: taxi ecosystem globally is going to scale right now. I
Speaker 1: think if it's in the billions, I'd be surprised in
Speaker 1: terms of revenue generation. But we think it's going to
Speaker 1: scale to the eight to ten trillion dollar level per
Speaker 1: year within the next five to ten years.
Speaker 2: Investing in a highly valued MAG seven tech company like
Speaker 2: Tesla or Nvideo or Microsoft isn't the only way to
Speaker 2: bet on AI's potential, though. Tasha Wang, a portfolio manager
Speaker 2: for Fidelity International based in Hong Kong, suggests looking at
Speaker 2: the infrastructure that supports the AI ambitions of MAG seven businesses.
Speaker 5: For example, semiconductor, you know you can easily access it
Speaker 5: via ETF and it's something that you know it's a
Speaker 5: structural growth story even before AI.
Speaker 2: In addition to physical technologies like semiconductors, Tasha said, investors
Speaker 2: should be thinking about the underlying commodities that tech relies on.
Speaker 2: With finite supplies, but the prospect of increasing demand, we
Speaker 2: can be.
Speaker 5: Talking about copper, and we can be talking about things
Speaker 5: like uranium. You know that's not traditionally on the radar
Speaker 5: of commality investors, but nuclear is such an important way
Speaker 5: to power the AI power needs.
Speaker 2: Our third expert agreed that anything related to power is interesting.
Speaker 6: That is the bottleneck right now.
Speaker 2: Michael Smith, who runs the Growth equity team at all
Speaker 2: Spring Global Investments.
Speaker 6: When you look at the commitments that have already been
Speaker 6: announced from the major players in the space and add
Speaker 6: it all up between now and twenty thirty, they need
Speaker 6: to obtain enough power to fuel basically the equivalent of
Speaker 6: thirty to thirty five million homes, which to put that
Speaker 6: in perspective, they are over one hundred and thirty million
Speaker 6: households in the US today.
Speaker 2: But Michael also advised being more forward looking in predicting
Speaker 2: where AI is going next.
Speaker 6: To use the surfing analogy. Don't chase the wave that's
Speaker 6: already passed. Get ready for the next one. If you
Speaker 6: miss the infrastructure wave and you feel like it's too
Speaker 6: late to buy Nvidia, don't worry. I think the next
Speaker 6: big wave will probably be the suppliers, the B to
Speaker 6: B companies that develop applications and tools that they sell
Speaker 6: to other businesses and help them use AI. And then
Speaker 6: if if you miss that wave or you're not comfortable
Speaker 6: with that, I think there's a huge wave coming behind them,
Speaker 6: the supplier wave, which will be the consumers of all
Speaker 6: this stuff. And when AI starts to directly improve everyday
Speaker 6: experiences for all of us, that there's going to be
Speaker 6: big opportunities.
Speaker 2: Another way to think about categorizing AI related investment opportunities
Speaker 2: comes from Denny Fish, who's head of Technology research and
Speaker 2: a portfolio manager at Janis Henderson.
Speaker 4: Denny Fish use the buckets of enabler, enhancer, and us
Speaker 4: there we're.
Speaker 3: Going to see waves of adoption and evolution. We are
Speaker 3: clearly in the enablement phase of AI and the infrastructure
Speaker 3: build out, and that's semis and that's power, data center infrastructure,
Speaker 3: all those things that you need to even be able
Speaker 3: to train a model or perform inference.
Speaker 2: In this enablement phase, Companies like Microsoft or Amazon, which
Speaker 2: have major cloud computing businesses are seeing massive growth. So
Speaker 2: are those physical infrastructure providers companies that manufacture chips or
Speaker 2: use liquid cooling systems for data centers. Denny Fish's next
Speaker 2: category is the enhancers.
Speaker 3: There will be companies that will embrace AI in a
Speaker 3: meaningful way to improve their competitive position in areas like
Speaker 3: software and internet.
Speaker 2: Tech companies like into It, which dominates in accounting and
Speaker 2: tax e filing and is trying to use AI to
Speaker 2: improve its product. And finally, there are end users, non
Speaker 2: tech companies that adopt AI early.
Speaker 4: A more sort of motley crew of companies that can
Speaker 4: incorporate AI to have a more competitive edge and operations
Speaker 4: in using agentic AI just really sort of deepening the
Speaker 4: reach of their business and becoming more relevant to their customers.
Speaker 3: You could listen to the transcript of every company in
Speaker 3: the S and P five hundred last quarter, right and
Speaker 3: I don't know, sixty seventy percent of them mention artificial
Speaker 3: intelligence in their transcript. So you can go through and
Speaker 3: pick your poison in financial services, healthcare, agriculture, insurance and
Speaker 3: find unique companies that are actually benefiting from this trend
Speaker 3: that aren't quite as obvious.
Speaker 2: Take John Deere, the agricultural services company that's using AI
Speaker 2: to identify which weeds and plants to spray, or healthcare
Speaker 2: companies like tempess AI, which uses the technology to analyze
Speaker 2: patient data to improve disease diagnosis. And treatment. Here's Kathy
Speaker 2: Wood again.
Speaker 1: That's in our top ten, which we think could become
Speaker 1: one of the most important healthcare information backbones in the
Speaker 1: United States.
Speaker 2: But what happens if all the plans to make AI
Speaker 2: profitable don't pan out exactly the way these companies have promised?
Speaker 2: How to head your bets after the break. The amount
Speaker 2: of money going into the AI space right now is
Speaker 2: frankly staggering.
Speaker 6: The current run rate spendings of the big hyperscaler companies
Speaker 6: alone equals like ten Manhattan projects.
Speaker 2: Michael Smith at all Spring.
Speaker 6: Pretty much AI has to work like we're all in.
Speaker 6: It is a massive percentage of the stock market.
Speaker 5: I think we all sort of in awe of how
Speaker 5: much money is going in right that. The magnitude order
Speaker 5: of magnitude is hundreds of billions of dollars, and they
Speaker 5: are big, they're GDP moving kind of numbers.
Speaker 2: Taosha Wang at Fidelity believes it makes sense that investment
Speaker 2: at this scale would drive GDP.
Speaker 5: But after that, the boost you know, through investment, needs
Speaker 5: to come from productivity. King and productivity is also an
Speaker 5: important driver of GDP. We are seeing anecdotal evidence of
Speaker 5: you know, certain industries really benefiting from the adoption of
Speaker 5: AI in terms of the productivity boost. But you know,
Speaker 5: for us to be broad economy GDP moving that we
Speaker 5: need to see it in many different industries that may
Speaker 5: not necessarily traditionally at the forefront of technology.
Speaker 2: That wide scale adoption and proven profitability are what Tashaw
Speaker 2: believes will determine whether the AI run up continues or
Speaker 2: whether it's more like a bubble that could pop.
Speaker 5: One can never time haul on the bubble is going
Speaker 5: to last and what is going to make the bubble
Speaker 5: burst and make the music stop. I think it's usually
Speaker 5: related to liquidity and cash flow. So to the extent
Speaker 5: that there's still money going around, then I think it
Speaker 5: can continue.
Speaker 2: Those bubble concerns are being driven in part by the
Speaker 2: large number of circular investment deals in this space. In
Speaker 2: other words, companies like open ai, Video and Microsoft all
Speaker 2: investing in each other. The fear is that it's those
Speaker 2: deals that are propping up the industry's growth and valuations.
Speaker 2: But Tasha is among the experts who say mutual investments
Speaker 2: aren't a reason to write the whole industry off.
Speaker 5: I think it's not necessarily a brand new practice that
Speaker 5: you know companies invest in other companies that are in
Speaker 5: their operational sort of sphere.
Speaker 2: But she also says it is reason for investors to
Speaker 2: take care.
Speaker 5: I would generally caution against things from a cash flow
Speaker 5: perspective that do not have, you know, real revenue prove,
Speaker 5: real profitability proof. Alarming amount of circular investments going on.
Speaker 5: That's certainly something that you know, want to be mindful of.
Speaker 2: Michael Smith has been on his team at All Springs
Speaker 2: since the dot com boom and bust, and there's a
Speaker 2: few things he learned from that experience.
Speaker 6: There are a lot of companies that want a piece
Speaker 6: of this pie, and to me, like the big difference
Speaker 6: is who's funding their investments from the profits that their
Speaker 6: legacy businesses generate, and who's dependent on the kindness of strangers,
Speaker 6: whether it would be outside equity investors, lenders, anybody who's
Speaker 6: helping to finance the growth other than the business itself,
Speaker 6: and just be very careful investing in companies that can't
Speaker 6: finance their own growth. I think that was the lesson
Speaker 6: learned in the late nineties and early two thousands. I mean,
Speaker 6: it was basically the inability to access the capital markets
Speaker 6: and continue to finance the growth that changed things that
Speaker 6: time around.
Speaker 2: As you may have noticed, the investment experts we spoke
Speaker 2: to tended to be bullish on AI. They've already bet
Speaker 2: on the industry themselves, after all. When we asked Kathy
Speaker 2: would if there were any AI related investments she'd caution against,
Speaker 2: she said, basically, don't move on to the next thing
Speaker 2: too quickly.
Speaker 1: A lot of people are saying, well, you know, this
Speaker 1: AI movement or opportunity is exploited. Let's move to the
Speaker 1: next thing, which is quantum computing. They've skipped over thematically
Speaker 1: to quantum because they think and I say they meaning
Speaker 1: thematic portfolio teams or what have you. They think AI
Speaker 1: has been exploited. We think it's barely begun.
Speaker 2: To read more about what these investment experts told Bloomberg
Speaker 2: Personal Finance reporter Susan Woolley, head to Bloomberg dot com
Speaker 2: or click the link in our show notes. This is
Speaker 2: the Big Take from Bloomberg News. I'm Sarah Holder. The
Speaker 2: show is hosted by Me, David Gera, and Wanha. The
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