Thematic

Artificial intelligence knows no borders

While AI-related stocks in the U.S. enjoyed significant fanfare in 2023, Fidelity's Jed Weiss is looking abroad for equally, if not more, compelling investment opportunities.

  • The rapid emergence of artificial intelligence in the U.S. has overshadowed its rise overseas, according to Fidelity Portfolio Manager Jed Weiss, who has capitalized by investing in shares of AI-driven international companies, often at substantially more attractive valuations.
  • "Well-known domestic companies, especially Nvidia and Microsoft, have certainly done their part to drive this technology but it truly is a global, interconnected economy," says Weiss, who manages Fidelity Advisor® International Growth Fund.
  • As longtime manager of this diversified international equity strategy, Weiss favors companies with multiyear structural growth prospects, high barriers to entry, and an attractive valuation, focusing on cyclically out-of-favor businesses with pricing power and limited competition, as well as firms exhibiting strong earnings potential and a share price that has fallen due to macroeconomic events.
  • Weiss considers semiconductors a cornerstone of AI technology, explaining that foundries around the world leverage highly advanced tools, including extreme ultraviolet lithography, to produce ever faster and smaller semiconductors than enable innovation in AI and 5G mobile communications.
  • In fact, he adds, EUV would not be possible without the expertise of companies like ASML, the monopoly maker of EUV lithography machines, as well as Japan's Lasertec, which Weiss considers the dominant supplier of inspection systems for EUV masks and mask blanks, two critical components in manufacturing an integrated circuit.
  • Meanwhile, Dutch industrial manufacturing company Aalberts specializes in vibration isolation and provides ultra-precision frames and high-purity fluid systems for the semiconductor industry, making it a beneficiary of AI-powered growth in EUV, notes Weiss.
  • Among AI-driven software firms overseas, Weiss points to Britain's Sage Group, a company that utilizes AI and machine learning to drive faster and more-efficient enterprise resource planning, namely integrated accounting, payroll, and payment systems.
  • "Knowing that all these firms are tied to the theme of AI in one way or another, what also has made them a good fit for my investment process is that their valuations have tended to be generally more attractive, given that overseas equity markets have meaningfully lagged domestic stocks the past several years," Weiss concludes.
  • Securities mentioned were fund holdings as of January 31.
  • For specific fund information such as standard performance and holdings, please go to the "Funds Managed" link on this page.
 
 

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