Why winning the AGI race is imperative … the BRICS AI alliance is forming … the problems with AI investing today … how Eric Fry is investing (and not investing)
AI is a technology that has the potential to create, or destroy, on a scale that humanity has never before encountered.
That’s why the U.S. will be pursuing an all-hands-on-deck strategy to master AI’s capabilities before anyone else does.
So writes our macro expert Eric Fry in his most recent issue of Investment Report.
Eric’s December issue offered an eye-opening comparison between today’s race to artificial general intelligence (AGI) and the 1940s Manhattan Project/1960s Space Race.
Back to Eric:
Like the Manhattan Project, the AI race is a high-stakes competition to develop a powerful technology of weaponization. And like the Space Race, the AI race is also a competition to seize control of a limitless new frontier…
Victory will arrive in the form of an advanced AI technology called artificial general intelligence, or AGI. This emerging category of artificial intelligence will not only be able to mimic human cognitive abilities but surpass them.
The stakes of this race are so consequential that they sound straight out of a James Bond thriller
In Eric’s issue, he quoted InvestorPlace’s CEO Brian Hunt, who recently shared his perspective on the gravitas of this race.
From Brian:
No database, no electrical system, no airplane flight, no financial system, no weapons system will be safe from a malicious AGI if the opposing force does not have an AGI of equivalent or greater power to fight back.
The country that achieves AGI supremacy will be the country that dominates the 21st century.
That’s why China is devoting extraordinary resources to this race.
It has many of its smartest people working on it. There is no limit to how much it will spend to win this race. It knows this is the great race of the 21st century.
It’s not just China. Russia is going full bore into AGI development, intent on beating the west to supremacy.
To illustrate, last week brought news that the BRICS nations are creating an AI alliance
To make sure we’re all on the same page, “BRICS” stands for Brazil, Russia, India, China, and South Africa, but the coalition also includes Egypt, Ethiopia, Iran, and the UAE.
Here’s Reuters:
President Vladimir Putin said on Wednesday that Russia would develop artificial intelligence with BRICS partners and other countries, in a bid to challenge the dominance of the United States in one of the most promising and crucial technologies of the 21st century…
“Russia must participate on equal terms in the global race to create strong artificial intelligence. It is precisely the advanced solutions that Russian scientists are currently working on,” Putin told an AI conference in Moscow…
Putin’s move to ally with China could change the dynamics of the AI race.
The U.S. is all too aware of those dynamics, which is why it’s gearing up to spend an unprecedented amount of public and private dollars to win the race.
Back to Eric:
Just like the Manhattan Project and the Space Race, the race to AGI is not only technologically daunting, but also stratospherically expensive.
Inconveniently, the more sophisticated AI technologies become, the higher the costs to train and operate them.
On that note, Oracle CEO Larry Ellison recently said, “the entry price for a real [AI] frontier model from someone who wants to compete in that area is around $100 billion.”
For investors who position themselves wisely in front of this tidal wave of spending, the AI race has the potential to create literal fortunes
That’s easy to write and sounds exciting, but where do you actually invest?
One option is an ETF like AIQ, which is the Global X Artificial Intelligence & Technology ETF.
However, one problem here is that many of its holdings aren’t pure-play AGI companies. For example, here are some of the top 10 positions:
- Tesla
- ServiceNow
- Netflix
- Salesforce
- Broadcom
Great companies, but lots of businesses with revenue models that are tangential to AI.
But that’s just one issue. The second is the price tag of these companies.
Investors have already bid up many these market darlings. Look at the same list of companies, now with their respective PE ratios:
| Tesla | 125 |
| ServiceNow | 176 |
| Netflix | 52 |
| Salesforce | 59 |
| Broadcom | 190 |
Now, these price tags and the tangential business models are fine if you’re only looking to trade bullish momentum. For example, Luke Lango’s subscribers are currently in an AIQ trade in Breakout Trader, a trading service that’s anchored in a market approach called stage analysis.
As soon as AIQ drops out of Stage-2 momentum, Luke will exit before the lofty valuations of some of its positions suffer serious damage.
But for buy-and-hold investors eyeing AIQ today, remember that your starting valuation plays a critical role in your long-term return.
In Eric’s issue, he highlights the challenge of finding a pure-play AGI that’s not already incredibly expensive
First, on the “pure play” aspect, here’s Eric:
The stock market does not offer any pure-play AGI companies. But it does offer an array of indirect plays on the race toward AGI.
Data centers are an example. Eric notes that they provide the essential foundations that enable AI technologies to function and progress toward AGI.
He provides a few examples, such as Quanta Services Inc. (PWR), one of the world’s leading specialty contractors in the utility, telecom, and power business.
Quanta’s electric power segment, which produces about half the company’s operating profit, could be a major beneficiary of the data center boom. Goldman Sachs projects sector growth could 1.7X by 2030.
But while he’s bullish on demand for Quanta’s services, Eric points out the valuation challenge with Quanta and many other great stocks today:
I expect [Quanta] will continue thriving during the data center construction boom. However, I am shying away from recommending stocks like this one because its lofty valuation already reflects a lot of good news.
Instead, my team and I have been focusing on the “next wave” of stocks that do not yet reflect their AI-powered growth potential. These companies, as a group, are well-positioned to benefit from the data center boom that will facilitate the race toward AGI.
Out of respect for Eric’s subscribers, I won’t detail all the ways he’s positioning readers for the AGI race…
But I will point toward one such company we’ve featured from Eric in the past – Aris Water Solutions Inc. (ARIS).
Aris is an emerging leader in the water-handling business for the oil & gas industry. Here’s Eric with how it intersects with the AGI race:
“The internet,” as most of know it, sometimes seems like an ethereal, nebulous force that effortlessly zips data and images through the air. We call part of it “the cloud,” after all.
But this nebulous force cannot operate without millions of physical servers humming along 24 hours a day inside the world’s data centers. And these millions of servers cannot operate without consuming prodigious volumes of electricity and water.
The tech industry’s large and growing water consumption has not yet attracted the same level of attention – or concern – as the industry’s growing energy consumption. But as tech companies expand their data center footprints worldwide, water consumption will become an increasingly challenging issue for them – and an increasingly expensive one.
Eric’s Aris recommendation on October 30 was well-timed. Subscribers are up 53.50%, but Eric believes far more growth is on the way, which bodes well for even greater returns:
The company’s growth curve could ramp higher over the coming years, thanks to a prospective, new “data center alley” in West Texas.
Since data centers require prodigious volumes of water to cool themselves, Aris’ advanced water treatment capabilities could attract robust demand from the tech companies that might build centers in the region.
Later this week, we’ll bring you more details on how to invest in this AGI race when Eric, Luke, and Louis Navellier release their latest joint research
Last year, these three experts came together to create a brand-new research project called the AI Revolution Portfolio. It represents the “best in class” stocks for the first stage of the AI Revolution.
Of course, a lot has changed in the last 12 months (including valuations), and a new crop of AI winners appear poised to take the baton in 2025. Our three analysts have spent the past few months collaborating to identify which AI stocks will lead next year, and they’re nearly ready to reveal their research. More on that later this week.
For now, let’s end with Eric’s 30,000-foot view on the opportunity before us with AGI:
Today, the race to AGI has launched a new high-stakes competition, one which, to borrow from JFK, the U.S. intends to win, because AI technology, like all technology, “has no conscience of its own. Whether it will be for good or ill depends on man” …
The new administration in Washington will attempt to eliminate any and all obstacles that could impede the path of progress toward world-dominating AGI technology.
Congress will remove regulatory hurdles and steamroll every other impediment to winning the AGI race…
The race to AGI will mobilize trillions of dollars of private and public investment…
Therefore, companies that supply or enable various facets of [this AGI race] could enjoy years of boomtime conditions.
Have a good evening,
Jeff Remsburg
