Alexander Green is an analyst, author and speaker whose primary mission is to show investors how to achieve and maintain financial independence. For 16 years, he worked as an investment advisor, research analyst and portfolio manager on Wall Street. He has been the Chief Investment Strategist of The Oxford Club since 2001. He has written several New York Times bestsellers, including The Gone Fishin’ Portfolio, Beyond Wealth, The Secret of Shelter Island and An Embarrassment of Riches.
In addition to directing The Oxford Communiqué (as well as The Oxford Communiqué Pro), he oversees three fast-paced VIP Trading Research Services: Oxford Microcap Trader, The Momentum Alert and The Insider Alert. He also writes for Liberty Through Wealth, a free e-letter focused on financial freedom that has more than 200,000 subscribers.
Artificial intelligence (AI) is having an impact on even the most established companies in the world.
The technology is quickly on its way to becoming ubiquitous. And it’s only just beginning.
It will have as much of an impact – on every industry – as the invention of computers and the proliferation of the internet.
Given all the media buzz, many investors are asking whether AI is really a world-changing technological development… or another investment craze.
The truth? It’s both.
The internet, for example, changed the way we do just about everything. Even in the early days, investors could see it coming.
Yet many unwisely threw money at unproven companies like eToys and Pets.com.
As a result, they lost great gobs of money during the internet stock meltdown between March 2000 and October 2002.
(Many of those companies never rose again.)
On the other hand, investors who plunked for established technology companies – like Microsoft (Nasdaq: MSFT) and Apple (Nasdaq: AAPL) – did exceedingly well in the years that followed.
I see the same thing happening with AI.
Artificial intelligence – a field of computer science that focuses on training machines to perform intelligent tasks – is a disruptive development along the lines of air travel, the internet, the smartphone, the cloud or even electricity.
Matt Gertken and Chester Ntonifor – BCA Research’s chief geopolitical strategist and chief foreign policy strategist, respectively – argue that superintelligent AI could boost economic growth by 30- to 100-fold, comparable to the impact of the agricultural or industrial revolutions.
So, yes, there is a lot of potential here.
And there’s one company that has been in the technology industry for so long that you could argue it essentially invented it. It’s been a pioneer in computers, software and now AI.
Its early computers helped NASA put a man on the moon. Its personal computers and hardware brought high technology to the masses, enabling businesses and individuals the world over to utilize the power of modern computers.
This company has been on the cutting edge of AI since 1997, and it remains a leader to this day.
AI technology stands to revolutionize the global economy so dramatically that if you’re an early investor in this company’s efforts and they’re successful, you’ll profit handsomely.
The Ghost in the Machine
Many investors are chasing flimsy AI-related companies that have little sales, no earnings and limited prospects.
Most of them will ultimately regret it.
That’s why your first choice should be IBM (NYSE: IBM). Founded back in 1911, IBM has been involved in the technology industry for over a century. It’s also one of the foundational players in the AI space.
Long known as “Big Blue” (due to the color of its logo and the blue displays on its computers from the ’60s through the ’80s), IBM helps businesses and governments reconfigure their IT departments for the cloud era.
It ensures that technological systems are not only faster and more efficient but also far more secure.
In today’s economy, technology serves as a fundamental source of competitive advantage.
It allows organizations to boost innovation and productivity.
It enables them to scale up or down, to cut costs, and to grow.
Consider that the world now creates 2.5 quintillion bytes of data each day.
AI is the only way to effectively process and use all this information.
(Already, nearly half of all U.S. companies use some form of AI in their business.)
It enables computers, robots and other connected devices to mimic the perception, learning, problem-solving and decision making of the human mind.
This allows machines to perform specific tasks with increasing accuracy and without human intervention.
AI applications are now used for speech recognition, language processing, virus and spam prevention, autopilot technology, image recognition, real-time recommendations, and even automated stock trading.
Bear in mind, IBM is the world leader in AI.
It has been working on applications in this field for over four decades and has deeper AI knowledge than virtually any company.
The firm’s supercomputer Deep Blue famously beat world chess champion Garry Kasparov in a six-game match in 1997.
You may also remember when Watson, a supercomputer developed by IBM, won a round of Jeopardy! against champions Ken Jennings and Brad Rutter in 2013.
Now IBM’s recently launched consumer-grade version of Watson – dubbed watsonx – is bringing all the company’s AI expertise to the fore.
After its Jeopardy! win, Watson was put to work helping doctors treat lung cancer. The knowledge gained from building Watson and its subsequent use in medicine was distilled into watsonx.
The program can be used to train, validate, tune and deploy new machine learning models and handle colossal data loads… and soon it will be able to produce reports and other content using the data it processes.
Rather than building public domain models like ChatGPT, IBM creates private models for organizations that can’t risk putting their proprietary data on the street.
The complicating factor for investors is that IBM won’t say how much of its revenue (which grew 2% in the most recent quarter) is tied to AI.
Why? Because it can’t.
As CEO Arvind Krishna put it…
Our mainframes have AI circuits – so is the mainframe business AI? I am going to do storage backup in the future with AI – is storage backup AI? Maintenance applications use AI. All of cybersecurity is going to use AI. Before the next five years are done, everything is going to have AI fused inside it.
Despite these exciting prospects, IBM is a bargain.
The stock sells for just 20.5 times earnings and its dividend yields 3.6%.
Yet it is still early for AI. Plenty of upside remains.
If this stock isn’t already in your portfolio, it should be.
Buy in now to profit from the grandfather of the technology industry and its foundational computing system, Watson.
Action to Take: Buy IBM (NYSE: IBM) at market. Set a 25% trailing stop to protect your principal and your profits.
Automated Profits
The media is buzzing about ChatGPT. And while it’s true that AI is incredible technology and will change a lot of things, the true power of the latest AI developments is far beyond anything the media can imagine.
This technology won’t just write better movie scripts… It will boost efficiencies and enhance profitability across the economy.
And as usual, the bigger a company is, the better it will be able to leverage this technology, the more resources it will be able to funnel into its development, and the more profits it will be able to hand to shareholders.
IBM is a prime example.
There will be many potential opportunities to make money as more uses for AI are developed.
But the real spoils will go to investors in the businesses that are best equipped to capitalize on AI and that will see booming margins as companies across the market embrace AI technology.
