Commentary Author: David Rees, Portfolio Manager, Regions Wealth Management
- Artificial intelligence is part of everyday life.
- The smart speaker that knows your favorite music genre.
- The thermostat that is digitally controlled.
- And, the map apps we all use to take the fastest route to the beach.
Yet, as remarkable as these innovations are, the real revolution with generative AI is just beginning. Technology companies are innovating and providing technology solutions needed to leverage AI and make our lives and work more efficient and seamless.
As those companies grow with demand, many people are considering AI investments to their individual investment portfolios because these companies are on the frontlines of powering the growth of AI.
At Regions Bank, our team in Regions Asset Management provides clients with a comprehensive, goals-based approach to managing, protecting and growing their assets. With decades of investment experience and deep industry knowledge, we are focused on market trends and industry news that can help our clients for the long-term.
As the world leverages generative AI across the marketplace, adding AI investments to a long-term investment portfolio plan may be an area to consider. Here are three key factors to consider before making a decision.
- Growth. Has the company maintained or improved its growth rate? Compare the past year with earnings statements from three to five years ago.
- Valuation. What’s the company’s current trading price? You may want to consider investing in a company that is undervalued so that the valuation can grow over time.
- Competition. Will the company be able to maintain its market share? Look at other companies working on similar technologies.
Most companies developing generative AI-based platforms are privately held and supported by venture capital companies. However, there are other ways that investors can have exposure to generative AI. Consider this background on the technology aspect of AI.
Publicly held companies that make complex, highly specialized electronic chips called graphics processing units (GPUs) are playing a critical role in the flourishing of this technology. These chips are the heart and the brain of generative AI.
Despite their name, GPUs do far more than deliver graphics. These chips are capable of processing vast amounts of data—rapidly—and have other benefits that are helping drive the generative AI revolution. Most production of GPUs comes from just a few companies.
In the technology sector, another likely beneficiary of the generative AI boom are software companies that incorporate these powerful algorithms into their products. The largest software makers and sellers of software are better poised to leverage generative AI since these systems must be trained on massive amounts of data to produce accurate content. You need a lot of data to train generative AI for it to have high accuracy. And large companies have access to large installed databases, so they will obviously be among the initial beneficiaries of generative AI.
Generative AI is creating many new investment opportunities to consider. If you need help exploring whether an investment in AI is right for your individual investment plan, Regions Wealth Management is a resource to help. To learn more, visit www.regions.com/wealth-management.
Investing in securities involves risk, including the risk of loss. Investment strategies or classes of investment are not personal recommendations for any particular investor or client and do not take into account the financial, investment or other objectives or needs of and may not be suitable for any particular investor or client. Material discussed should only be a considered educational or a single factor in making their own investment decisions, while taking into account the current market environment and their individual investment goals. Diversification strategies do not ensure a profit and do not protect against losses in declining markets. Past performance is no guarantee of future results. Although Regions believes this information to be accurate as of the date written, it cannot ensure that it will remain up to date. Statements of individuals are their own—not Regions’. Consult an appropriate professional concerning your specific situation. In providing this communication, Regions is not undertaking to provide impartial investment advice or to give advice in a fiduciary capacity. Some contributors to this presentation may have active positions in securities or companies discussed.
