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AI development will be a marathon, not a sprint

Fidelity's Adam Benjamin is looking beyond the short-term splash made by AI in 2023, believing the most compelling investment opportunities will unfold in several stages.

  • Because of the complexity of generative artificial intelligence—identifying use cases, building and training models—Fidelity Portfolio Manager Adam Benjamin believes the technology will not be an overnight sensation, but rather a tech evolution that will likely take many years for most enterprises to implement into their workflows.
  • "The late-2022 launch of ChatGPT has everyone salivating about the transformative possibilities of generative AI, but the near-term investment opportunities are likely to be more down to earth," explains Benjamin, who manages Fidelity Advisor® Semiconductors Fund.
  • Core to his investment approach in managing the focused industry strategy, Benjamin believes the value of technology stocks is in large part determined by the companies' potential to generate earnings and cash flow, while his investment framework focuses on themes that impact the largest end markets, determining potential winners/losers, and how certain firms that are technology disruptors can impact incumbents.
  • The key to capitalizing on AI, he claims, is recognizing that it will unfold in several stages, pointing out that although innovation has happened rapidly, the current phase is still largely centered on "picks and shovels," meaning infrastructure with applications to follow.
  • That said, Benjamin believes this early-stage development will evolve and continue to be at the heart of the AI infrastructure build-out, helping to further drive the architecture-based shift toward accelerated computing.
  • "For context, this progression echoes the development of the internet in the late 1990s, when shares of infrastructure providers Cisco Systems and Juniper (then Juniper Networks) were star performers, setting the stage for the advent of applications in e-commerce, sales and marketing, and internet security, among other crucial areas," contends Benjamin.
  • Some of the largest overweights in the fund, as of December 31, represent what he believes will be the most significant beneficiaries of the AI infrastructure buildout.
  • For example, Benjamin cites Nvidia, a company that has been investing in AI for more than a decade, and its full-stack solutions of chips, software (including access to pre-trained models), and systems have positioned it extremely well as the provider of choice for hyperscalers, enterprises, and sovereign nations looking to embrace generative AI.
  • Additionally, he highlights that Marvell Technology has several key pieces of technology, namely its optical interconnects and ASICs, or application-specific integrated circuits, to assist hyperscalers in developing custom AI solutions.
  • Lastly, Taiwan Semiconductor Manufacturing, which Benjamin considers a leader in process technology for semiconductor manufacturing, has positioned itself as the producer of choice for those requiring high-end computing solutions, such as generative AI applications.
  • "As adoption grows in the coming years, and a world without AI likely becomes but a distant memory, companies will be scrambling to incorporate the technology in their products and operations," Benjamin concludes. "As an investor, I'm carefully sifting through the perceived beneficiaries and those that could be negatively disrupted."
  • For specific fund information such as standard performance and holdings, please go to the "Funds Managed" link on this page.
 
 

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