Wise investors are paying attention to the sectors receiving tremendous boosts from the seismic technological changes currently underway: the proliferation of AI and the push to adopt electric transportation. Just as oil enabled the internal-combustion boom and became one of the best sectors for investors for much of the past 150 years, these mega-trends will likely benefit those sectors which produce and sell the technologies. Their investors are well-positioned to reap the same over the long term.
These sectors are my three recommendations for investors to consider as momentum builds to integrate these technologies into our day-to-day lives.
Chips
The chip sector is set to boom due to the use of semiconductors in both creating and enhancing AI systems. Nvidia (NASDAQ:NVDA) currently dominates the chip market as the top producer of those needed to create AI, but the firm is unable to get enough of its chips made to meet the demand for them. The surging demand is expected to open the way for other chip makers including Intel (NASDAQ:INTC) and AMD (NASDAQ:AMD),
Moreover, the firms that actually manufacture chips will likely benefit from the AI boom. Among the companies in the latter category are Taiwan Semiconductor (NYSE:TSM), the world’s leading chip manufacturer, and increasingly Intel (NASDAQ:INTC).
Another chip maker well-positioned to benefit from the AI revolution is Qualcomm, Inc. (NASDAQ:QCOM), which makes low-power chips that are likely to be used extensively “when it comes to enabling AI systems to perform tasks after these systems are created.” Finally, Applied Materials (NASDAQ:AMAT), which markets equipment used to make chips, is poised to get a huge boost from the AI boom.
Electricity
In many ways, the push to adopt the electrification of transportation is making electricity the new oil. Just as companies boomed that sold equipment which supported oil exploration, petroleum extraction, and oil refinement, I believe that we’ll see a similar phenomenon when it comes to companies involved with electricity.
Pointedly, the companies that manufacture the systems used to produce electricity cheaply, efficiently, and cleanly are likely to be very successful. This includes solar, wind, and hydrogen firms as well as companies whose products regulate and enhance electricity flows, such as Stem, Inc. (NYSE:STEM), American Superconductor (NASDAQ:AMSC), and Itron, Inc. (NASDAQ:ITRI).
Finally, firms that sell equipment used by power plants and that support the transport of electricity should produce phenomenal returns going forward. I reported previously that General Electric (NYSE:GE) “announced that it, along with a number of its partners, had won three deals worth a cumulative 6 billion euros to develop high-voltage direct currents in Europe’s North Sea.” This is a strong indicator of how lucrative this sector may become as increasing demands for electricity spark new initiatives.
Artificial Intelligence
And of course, companies that extensively utilize AI or who build AI systems themselves for a single sector should perform very well over the longer term.
As I noted in a previous column, Goldman Sachs (NYSE:GS) “has estimated that AI ‘could boost productivity growth by 1.5 percentage points per year over a 10-year period,’ lifting the index’s bottom lines by 30% or more over the next decade.”
If that’s true for the average company, imagine how large the profit gains will be for those companies that focus tremendously on AI.
In the software space, Microsoft‘s (NASDAQ:MSFT) profits should soar, while Amazon’s (NASDAQ:AMZN) cloud unit should get a big lift. Meanwhile, firms that have long concentrated on using AI within a single sector, such as Upstart (NASDAQ:UPST), Lemonade (NYSE:LMND), and Schrodinger (NASDAQ:SDGR) should generate huge profit increases over the longer term. That’s because they have honed their techniques and data over long periods of time, making it very difficult if not impossible for competitors to catch up with them.
As of the date of publication, Larry Ramer holds long positions GE, SDGR,INTC,AMSC, and STEM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
