It’s Time For “AI 2.0” – And These Two Companies Have Figured It Out
Two stocks to consider ...
It’s a lesson I learned early on … as a journalist who covered companies of all types … as an analyst who scrutinized their businesses … and as an investor myself.
The lesson: It’s not the technology itself that matters; it’s what that technology does – and the moneymaking doors that technology opens.
For the Wealth Builders among us, we know that the most-powerful storylines lead to the most powerful wealth windows.
And one of the single most powerful storylines I’m following is the “Artificial Intelligence Era.”
And we’re looking at a Wealth Builder one-two punch: Fast growth … and a huge market.
Let me show you the numbers – and then give you a tour of two companies with an early-leader advantage.
A Scorching Growth Rate
Researcher Market Growth Reports says the worldwide AI market will grow from about $67.4 billion in 2022 to a forecasted $501.8 billion by 2026, a compound annual growth rate (CAGR) of 39.73% during that short run.
Here in the early going, Nvidia Corp. NVDA 0.00%↑ has been anointed as the “face of AI” for investing.
But there’s much more to this breakthrough technology than the chip maker.
Indeed, in the J.P Morgan Private Bank report “How to Invest in AI’s Next Phase” – published just last week – the investment bank sees two “eras of AI,” which it has labeled as AI 1.0 and AI 2.0.
In AI 1.0, we’re talking about the “infrastructure that underpins AI.”
But AI 2.0 is more nuanced – the J.P Morgan Private Bank report says “most of the unrecognized value in AI is in areas such as software and applications.”
Back in the February, during the launch week of Stock Picker’s Corner (SPC), I released two reports about “surprising” companies that combined AI, data and automation to cut costs and boost their financial performance.
Those two companies were McDonald’s Corp. MCD 0.00%↑ and Wingstop Inc. WING 0.00%↑.
Burgers and Wings vs. Meaningless Swings
Let’s start with the Golden Arches.
McDonald’s signed a deal with Alphabet Inc. GOOGL 0.00%↑ in December to connect Google Cloud Technology to its restaurants across the world and “apply AI solutions.” While the AI solutions announcement was light on details, we do know that self-ordering kiosks and robots that bring your food are some of the McDonald’s automation investments taking shape … in real-time.
Plus, this deal may help McDonald’s take the tons of data it collects and sort it into actionable insights. The company can see and understand what folks are ordering, how “special items” are faring and how effective certain coupons or ad campaigns are proving to be.
Then there’s Wingstop, a Texas firm providing an array of sauce options for its popular bar food. Wingstop isn’t just dabbling in AI – it’s using it as a difference-maker in its business. In May of last year, it launched an AI-based voice ordering system – an upgrade that streamlines orders and helps with upsells.
It’s even bringing its entire tech platform in-house.
Keep in mind that this is still just the early stages for implementing AI into business practices.
“We still see AI, one of the most revolutionary technological advancements in recent history, as a multi-year opportunity. It is only just starting to show up in corporate bottom lines,” that earlier-mentioned report said.
As companies like McDonald’s and Wingstop execute turning AI from a buzzword into practical applications that boost productivity, cut costs and increase sales, you’re going to see better and better earnings reports in the years ahead.
Companies that don’t just talk a good game – but that actually use the technology – represent major Wealth Building opportunities.
But contrast Mickey D’s and Wingstop with companies that invoke the term AI – and use it to trigger investor emotion – but don’t have an actual strategy.
In short, they’re playing a kind of “shell game” – getting folks to focus on the technology … but not on what the technology does.
As a veteran journalist, analyst and investor with a 40-year perspective, I’ve seen these meaningless swings at hot technologies – many times.
But I’ll share two quick examples – both of which you might recall.
In the late 1990s and early 2000s, lots of companies added “dot-com” to their name – hoping to cash in on the Internet boom. But they did little to back the name with real strategies or real technology.
It happened again during the cryptocurrency craze a few years ago.
Long Island Iced Tea Corp. was a beverage company whose first product debuted in 2011. In 2017, the company “rebranded” itself as the Long Blockchain Corp. and said it was exploring blockchain-related acquisitions. Nothing came of it - outside of insider trading charges.
In 2018, Eastman Kodak Co. KODK 0.00%↑ – a company I won major awards covering as a journalist – tried to reinvent itself by invoking “cryptocurrency” and “blockchain” as part of an “image-rights-management” platform. Two years later, Kodak tried a similar ride-the-coattails strategy with the COVID-19 Pandemic – and vaccines. That, too, devolved into controversy.
Situations like these are Wealth Killers.
I’ll help you with both.
AI is going to be huge, so I’ll identify the potential Wealth Builders.
And I’ll spotlight the Wealth Killers to avoid.
To get you started, you can see my report on McDonald’s here and my report on Wingstop here.