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Beyond the bubbles: Potential bargains amid a bullish bonanza

Fri, 03/12/2021 - 17:02

With all the recent commotion over green energy and electric vehicles, several other key future industries have looked somewhat neglected. Now, EVs and renewables are undoubtedly going to be huge areas of growth in the next 5-10 years, but what about robots, automation and the Internet of Things? It seems like a lot of us have been blinded by the bright lights of Tesla (TSLA) and Enphase Energy (ENPH), causing us to ignore perhaps the most lucrative sector of the coming decade: artificial intelligence or AI. Apart from the three massive future growth industries named above, artificial intelligence is also the driving force behind self-driving technology and smart power management, breakthroughs that are expected to revolutionise none other than EVs and green energy!

Despite being at the heart of nearly every cutting-edge tech sector you can think of, there are a surprisingly small number of pure AI equities to choose from. So, where can you put your money if you want to cash in on all this growth to come? Well, the best bet is to look for companies that are using artificial intelligence to create an exciting new product or service — or even improve an existing one. Lucky for us, there are plenty of those! Because of AI’s pervasive nature, these companies span a wide range of industries and markets, so it should be relatively easy to put together a nice, well-diversified portfolio. Without further ado, then, let’s take a look at some of the best places to hunt your winners.

Chips off the old block

What better way to expose yourself to the wider AI trend than investing in the hardware that makes it all possible? As this revolutionary technology gradually becomes an ever-present feature of our daily lives, the race to develop the fastest and most powerful chips will only intensify. While there will, of course, be winners and losers as in any race, it’s safe to say that industry leaders like Nvidia and Intel will not only survive but almost certainly thrive. Naturally, the upside is probably not going to be as earthshattering as if you were to pick a penny stock on its way to being the next big thing, but the risk level is definitely more palatable. A good compromise could be to consider some of the Chinese foundries that are predicted to begin producing viable chips for data centres, self-driving vehicles and cloud computing in the next couple of years. One company that looks like an attractive proposition is SMIC, the Asian giant’s biggest chipmaker, particularly after its glittering Star Market debut this month.

Head in the cloud

The concept of cloud computing has been around for a while now, but until recently, its main application was simple file storage. However, as increasingly complex systems migrate to the cloud, its potential as the beating heart of Web 3.0 is becoming increasingly apparent. Sooner than you might think, our whole lives will be in the cloud, instantly accessible from any device or location. The major players in this industry are undoubtedly Amazon (AMZN) and Alphabet (GOOGL). Not only do they have great proprietary solutions, but they are also actively buying stakes in — and even acquiring outright — many innovative private companies in this space. Like most US tech stocks, though, these two behemoths have pretty high valuations at the moment. It might be a good idea to look to their Chinese counterparts Alibaba and Baidu, which are pursuing cloud tech just as aggressively, but whose P/E ratios look much more attractive in light of Communist Party monopoly crackdowns.

Nobody knows you like AI do

Sometimes artificial intelligence can feel a little distant, but, actually, it’s already an integral part of all of our lives. Why do you think YouTube seems to know exactly what you’d like to watch next? How did that mutual friend of a friend you just met last weekend up in your “People you might know” list on Facebook? Or how is Netflix able to suggest shows and movies like they’ve known you your whole life? It’s the algorithm, stupid… and it knows you better than anyone! And this is just a drop in the ocean: nearly every consumer-focused app or digital service in existence will use AI to some extent in the future. Obviously, Facebook (FB), Netflix (NFLX) and YouTube’s parent company Alphabet are solid plays for any investor looking to ride the consumer AI wave, even if they’re a little expensive at present. But if you’re looking for a great deal, you might have better luck outside the US. Russian internet giant Yandex (YNDX) is currently trading at a more than fair valuation. Moreover, its extensive portfolio of AI-powered solutions — coupled with its access to rapidly growing Central Asian markets — make it a screaming buy. Another bargain stock is Tencent Holdings (TCEHY), which is down more than 10% amid CCP scrutiny.

Follow the smart money with Libertex

Whatever your thoughts on the future of AI equities, the fact that the technology itself is going to be a huge presence in everybody’s day-to-day life is more or less indisputable. It’s no surprise, then, that forward-looking funds are buying up big names in these sectors during this current pullback. But since Libertex offers both short and long positions on a range of AI stocks, we can help you get a piece of the action whether you think the market is overvalued or good value.

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