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CONTRIBUTORS

Jonathan Curtis

Chief Investment Officer,
Portfolio Manager
Franklin Equity Group
United States

Key takeaways:

  • Investors who focus on capturing artificial intelligence’s (AI’s) investment potential solely through tech companies and infrastructure providers may miss the bigger opportunity.
  • The AI productivity revolution is already underway—forward-thinking companies in sectors across the economy are harnessing AI to expand profit margins and drive revenue growth.
  • We believe the market continues to significantly misprice generative AI’s potential value creation, particularly outside of the tech sector.
     

Why AI’s biggest investment opportunity is not in tech

Remember when everyone thought the internet was just for email? Some investors in gen AI might just be making the same mistake.

Wall Street is obsessed with who’s selling AI—semiconductor companies, copilots, chat bots—and with good reason. These companies are creating AI’s infrastructure and building the foundation on which the Intelligence Age will stand. But we think they're missing the real story as we discuss in this paper: AI isn’t just something tech companies sell. It's something every company will use to become more productive, generate new sources of revenue and grow earnings faster.

When personal computers (PCs) arrived in the 1980s, smart investors didn't just bet on IBM, Microsoft and Intel. The real long-term winners were companies that used computers to digitally transform their businesses—banks that automated transactions, retailers that revolutionized inventory management and manufacturers that streamlined operations. We believe the same thing is happening now with the application of AI, but many times faster.

Our conclusion

In 1995, if you bought the PC leaders, you did well as an investor. But if you bought the smartest companies that built competitive advantage by digitizing their business early using the PC? You probably got rich.

We believe today's AI moment is bigger. It’s faster. And it’s hiding in plain sight. The market sees AI as a tech story. Smart investors see it as an everything story. While others bid up the obvious AI plays, we think you can buy future AI winners at yesterday’s prices. The gap between current valuations and AI-powered earnings potential is significant, in our analysis. In five years, people will wonder how anyone missed it.

The only question is: Will you see it before everyone else does?

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