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"During a gold rush, don't dig for gold. Instead, sell shovels."
1. AI and AI-adjacent businesses have boomed in stock price
2. AI infrastructure companies e.g. Nvidia (the shovel sellers), have seen enormous real-world increases in revenues and profits
3. Outside of a select few AI software businesses e.g. OpenAI, very few have been able to use AI in ways that customers are willing to pay for. This was evident in the earnings of many software businesses last quarter
Lots of businesses looking to monetise AI software (the gold diggers) have been investing heavily in AI infrastructure in a race to corner their markets. But for many that investment won't pay off in the near term (or ever). I anticipate this translating into a drop in demand for AI infrastructure. What happens when the AI infrastructure companies miss on earnings? π
AI is incredible and already changing the world, but that change won't be instant. "Mining gold" is a risky business, and many "miners" are coming up short. The AI "gold rush" has created some froth in the market and a reset is inevitable.
π° Portfolio
I've added to my $RMV.L (Rightmove PLC) position as the coming UK rate cuts and strengthening economy (GDP surprised nicely today) will translate into more housing market activity. I've also initiated a position in $SHOP (Shopify Inc.) - the business is booming with revenue growing 25% YoY (5Y CAGR 44%) and a return to profitability.
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Sun Oct 06 2024 11:02:43 GMT+0000 (Coordinated Universal Time)
