The “Nvidia effect” will drive the next wave of AI profits

Colin’s note: In my 20 years as an investor, I’ve been waiting for… an idea so big that it has real potential to create the future.

I am talking about the rise of artificial intelligence (AI). It is a transformative technology, unlike anything we have seen since the creation and rollout of the Internet.

And the gains from AI will dwarf the gains made by investors backing Internet stocks at the time.

That’s saying something. In the early days of the internet boom, Qualcomm rose 3,574%, eBay rose 4,087%… and Amazon soared 6,562%.

That’s why, next Wednesday, I’ll be revealing what I discovered on a recent trip to Nvidia’s headquarters… and how it will capture the next wave of AI profits.

You see, while mainstream investors are chasing Nvidia higher, dozens of smaller, undiscovered AI stocks can deliver gains of 1,000% and more.

So make sure to RSVP to my “Nvidia Effect” event. It will air next Wednesday, September 20 at 8 p.m. You can do it with one click here.

Then, read why I’m looking beyond some big tech stocks to play the AI ​​boom.

dear reader,

In 1999, business leaders around the world were asking the same question…

“Should we have a website?”

The answer is now clear. Of course, a business needs a website

But in 1999, the Internet was still new. And it was hard to tell.

Then, in 2007, business leaders were asking another important question…

“Should we be on social media?”

And the answer, once again, was yes.

Today, most companies use Facebook, Instagram, LinkedIn and TikTok to connect with their customers. And the companies behind these platforms are among the largest in the world.

Now another important technical question arises. And business leaders want to know all the answers.

“Should we adopt AI?”

As I’m going to show you today, the answer will be another resounding yes.

Companies will use AI to reduce costs… increase margins and increase profits.

But it’s important to know where to invest now… and how to avoid overpriced names from bullish traders this year.

First, let me explain a little more about why AI is such a huge opportunity today…

Fastest growing app in history

By now, you probably know about ChatGPT. This is a form of generative AI.

ChatGPT is an AI chatbot from OpenAI that reads the internet and can answer any question you ask – just like a human.

This is a big win. Researchers have been tinkering with AI for over 70 years.

One of the earliest AIs was a program that learned how to play checkers in 1952.

Since then, AIs have translated languages… learned to drive cars and navigate roads… become the world’s best chess players… discovered new drug candidates… and guided unmanned probes to Mars.

But those were all single use cases. Every AI exists to solve a specific problem.

Today’s AI systems are different – ​​and this difference will create a new wave of wealth for investors as well as society.

The race to adopt AI is on

We can now train AI systems on huge datasets and have them perform various roles.

ChatGPT, for example, can write songs, answer exam questions, and write computer code.

Special versions of it can be used as customer service agents… write marketing materials… even do live analysis on stocks and bonds.

This flexibility means AI is accessible to almost every business in the world.

And just like in 1999 and 2007, they’re going to embrace it by and large.

Arvind Krishna, CEO of IBM, said Bloomberg AI will replace 30% of office jobs in the next five years.

In IBM’s case, I calculated that this would result in annual savings of about $780 million. This would have boosted IBM’s 2022 profit to $1.6 billion by 48%.

Most CEOs only dream of margin expansion. And when margins increase, profits increase. Share prices increase. And investors get richer.

And it’s not just IBM. There is a strong economic incentive to adopt AI across the board to increase profitability.

That’s why I’m looking beyond some of the big tech stocks to play the AI ​​boom.

Thousands of non-tech companies will soon start the race to make their businesses more profitable by adopting AI.

It presents an opportunity for us as investors…

Follow 7%

Consulting firm PwC has calculated that AI will add $15 trillion to the world’s GDP by 2030. That’s 16% of last year’s $95 trillion global GDP.

Most of the value added will come from increased efficiency. AIs will get automated work done faster, cheaper and more accurately than humans alone can do.

Already, investors are paying companies just for profit saying They are embracing AI.

Consulting firm Accenture found that its share price rose 40% when management mentioned AI on an earnings call.

But Accenture also found that only 7% of companies are using AI to make more money.

For those who were, the results were impressive. Companies in that group were able to grow their revenue by 50% more than their peers.

For example, a major solar panel installer uses AI on satellite imagery to automate planning. This gives about 25% discount on its installation cost.

And Procter & Gamble is using AI to reduce its time and cost to develop new products.

The company is asking in-house AI to create a new soap formula that will save costs without sacrificing its cleaning performance. This can provide possible solutions that have a good chance of working. This reduces the often lengthy and expensive experimentation process.

In short, the 7% of companies that use AI to build a better business will outperform the 93% that don’t. And that 7% is not as obvious as it seems.

Look beyond the obvious names

The biggest winner so far in the AI ​​boom is US chipmaker Nvidia.

It is the world’s largest supplier of advanced semiconductors that enable AI systems like ChatGPT to process data so quickly.

And Nvidia shares have tripled in value this year. This is the power of having an obvious name at the beginning of this trend.

But here’s what might surprise you. i do No Recommend buying shares of Nvidia.

Now with a market value north of $1 trillion, it takes a long time for this stock to move.

The company needs to add $10 billion in market value to move the stock up 1%. Conversely, if a stock is worth $10 billion, it only needs to add $100 million The market value will have the same effect.

Another problem is that Nvidia is priced for perfection. Its shares trade for a price-to-sales ratio of 34. This means you pay $34 as a shareholder for every dollar of company sales.

That’s 4x more than its closest competitor, Advanced Micro Devices (AMD).

And when a stock is priced to perfection, even the smallest slip-up can send shares plummeting.

As a company, Nvidia has a bright future. But its days of explosive growth potential as an investment are over.

Return the Nvidia effect instead

Fortunately, we don’t have to invest to take advantage of Nvidia’s dominance.

It all comes down to what I call the “Nvidia Effect”.

When a company becomes as large and powerful as Nvidia, every move it makes affects the smaller companies that support its business.

And right now, there are three small-cap stocks because its influence will increase.

These stocks are only a fraction of Nvidia’s size. So, the profit on the offer is many times higher than the chipmaking giant’s offer.

I want to give you more details about this Nvidia effect as well as the three small-cap AI stocks I currently recommend.

To learn more, I invite you to join us on Wednesday, September 20th at 8pm ET.

I’ll lay it all out in one investment summit… and I’ll share my favorite way to profit from the AI ​​megatrend.

You can go here and reserve your seat with one click.

I look forward to seeing you there… and showing you how you can benefit.


Colin Tedards
editor, bleeding edge

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