Patience Pays Off in AI Investing

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Editor’s Note: Today’s article comes from Senior Markets Expert Matt Benjamin. He details some of the exciting calls Chief Investment Strategist Alexander Green has correctly made in The Oxford Communiqué and The Oxford Communiqué Pro

Particularly when it comes to artificial intelligence (AI).

Alex has quickly become a leading voice in the AI space. Read below to make sure you’re caught up on his insights.

– James Ogletree, Managing Editor

In investing, patience often brings significant rewards.

So does being early.

In the very short run, investors flock to – and often just as quickly abandon – the stock of the moment. Last year it was Nvidia (Nasdaq: NVDA), a leading manufacturer of chips used for artificial intelligence (AI) applications.

The stock’s meteoric rise last year was due to a sudden and unexpected investor mania surrounding AI.

Other AI-related stocks like Microsoft (Nasdaq: MSFT) and Amazon (Nasdaq: AMZN) – and the rest of the so-called “Magnificent Seven” – also soared last year due to this AI exuberance.

And if you look back at news stories and market data, you can just about pinpoint the beginning of that exuberance…

It was November 30, 2022, the date that OpenAI, an AI research organization, launched ChatGPT, its AI-powered chatbot.

Chart: AI Exuberance

A Turning Point

The price charts for five of the other Magnificent Seven stocks look almost exactly the same, with the inflection point at the very beginning of December 2022.

Tesla (Nasdaq: TSLA) – a carmaker with much less AI exposure – is the exception.

Chart: The Rest of the Magnificent Seven (Minus Tesla)

As you can imagine, I read quite a lot of market commentary, yet I can’t recall much discussion of AI’s potential impact on the economy and stock prices before that date.

But if you were a subscriber to The Oxford Communiqué back in January 2021 – almost two years before the ChatGPT launch – you heard about this new technology’s potential for investors long before the Magnificent Seven showed up on every investor’s radar.

In the Annual Forecast Issue for 2021, Chief Investment Strategist Alexander Green predicted the power of technologies like artificial intelligence, data analytics and cloud computing would change the world. This is what he wrote in that issue:

AI is creating remarkable achievements. Computers are able to perform specific tasks with increasing accuracy and without human intervention. Applications are now used for speech recognition, language processing, virus and spam prevention, autopilot technology, image recognition, real-time recommendations, and even automated stock trading.

Alex also identified IBM (NYSE: IBM) as a company that would be a leader in AI as well as data analytics and cloud computing. And he recommended that Communiqué subscribers pick up some shares of the 113-year-old technology firm.

We added IBM to the Oxford Trading Portfolio, where it remains today.

But some patience was required with this pick. IBM shares muddled along for a couple of years for modest gains.

Over the past six months, however, the stock is up 30%, compared with 7% for the S&P 500. And so far this year IBM is up 16% while the S&P 500 is up about 3%.

Best of all, IBM shares soared 13% last Thursday, January 25, hitting an 11-year high.

What happened?

After the market closed the day before, the technology firm reported solid fourth quarter results that beat analysts’ estimates. Earnings of $3.87 a share on revenue of $17.4 billion both outperformed expectations.

But that wasn’t what sent Big Blue’s shares skyward. It was that growth in all of its product and service segments was driven by cloud computing and AI technologies… and that its book of business for AI technologies doubled from the third quarter to the fourth. That book of business is now estimated at around $400 million and is growing as client demand accelerates.

Barron’s now says that IBM “is one of the most underappreciated plays on the AI trend – and investors now appear to be catching on.”

Alex caught on to this play three years ago. If you followed his advice and remained patient, you’re now reaping the rewards.

(Another cloud network and AI-related stock Alex selected for The Oxford Communiqué Pro portfolio last August was the best-performing stock in the S&P 500 that month and is up 51% since he recommended it.)

But if you didn’t read Alex’s predictions about AI in January 2021 and missed these two stocks, don’t worry. There will be plenty more where they came from.

In our most recent Communiqué Forecast Issue, Alex and I identified eight megatrends – cloud computing and AI are just two of them – that will create many more success stories this year and over the next decade.

My advice? Follow along this year as Alex and the Oxford Club Research Team find the companies most likely to benefit from these innovative technologies. Then invest in them and remain patient.

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