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Artificial intelligence boom
Advances in artificial intelligence have sparked a lot of excitement among investors, and companies that are able to gain exposure to generative AI are experiencing a lift, especially those that can demonstrate how to derive revenue from it, according to Fidelity's Jean Park.
- Many firms claim to be direct beneficiaries of AI advancements, but we are in the early chapters of this book and the competitive landscape is just now coming into view, claims Fidelity's Jean Park.
- "This is where Fidelity's research capabilities really shine," says Park, portfolio manager of Fidelity® Fund. "We are able to assess this trend from many different points of view, speaking to both public and private companies, as well as researchers and developers directly within the AI realm."
- As an investor, Park relies on her belief that stocks of high-quality companies exhibiting persistent growth and positive free cash flow, when purchased at reasonable prices, should outperform the market over time.
- To capitalize, Park has invested the fund in several companies that she believes have the potential to benefit as AI continues to grow.
- For example, Cadence Design Systems develops software that is integral to the development of increasingly intricate and complex semiconductors that power laptops, mobile phones, and autos, while also enabling AI advancement, Park points out.
- She also highlights Synopsys, another software provider that helps facilitate AI development.
- Turning to chipmakers, Nvidia was one of the portfolio's top positions, as of October 31. "The company dominates the market for advanced graphics chips that are the lifeblood of new generative AI systems, including the viral chatbot ChatGPT," says Park.
- She views Salesforce as a potential winner, given that the firm has been infusing generative AI throughout its client relationship management platform, to enhance customers' experiences across all its applications and workflows.
- Park feels these new AI-driven capabilities have differentiated Salesforce's products and services, giving the company opportunities to drive meaningful profitability over time.
- Each of the aforementioned businesses have generated solid free cash flow, according to Park, noting a key facet of her investment approach.
- "As with any emerging trend, determining the winners early on can make a big difference," Park concludes. "Moreover, with the benefit of Fidelity's deep research team, I feel I have an advantage in assessing companies' ability to harness the growth of AI to drive revenue and cash flow."