Ideas can revolutionize our everyday life.
I’m talking about ideas like the internet, the sequencing of the human genome, the decentralization of global finance via cryptocurrencies, and most recently, breakthroughs in artificial intelligence (A.I.).
But something you cannot forget is that for every revolutionary idea there have been hundreds if not hundreds of thousands that failed.
In other words, picking and choosing cutting-edge investments that are going to benefit from these secular growth trends is often a very speculative practice.
As an early investor to these revolutionary ideas, you could be minted a millionaire or more likely, lose thousands of dollars out of pocket.
And speculation is the antithesis of my sleep well at night (SWAN) plan, especially in the technology sector right now.
Here at the Intelligent Income Daily we’re always looking for the best opportunities that bring you closer to financial freedom without risking your hard earned savings.
So, instead of giving into FOMO (the fear of missing out) and placing speculative bets on volatile tech stocks, today I will give you an alternative way to benefit from the biggest idea in the tech sector right now – the rise of artificial intelligence – without taking outsized risks or chasing unreasonable valuations.
Don’t Get Caught Up In the A.I. Crossfire
Right now, there’s a battle brewing between big-tech behemoths, Alphabet (GOOG) and Microsoft (MSFT) in relation to A.I. chat bots and the integration of artificial intelligence into their internet search engines.
Microsoft recently invested $10 billion into ChatGPT to enhance its Bing search engine.
That news has helped to push Microsoft’s market capitalization above the $2 trillion threshold as investors envision the potential benefits of adding best-in-class artificial intelligence to its digital platforms.
As a result, the Google parent company, Alphabet, announced a “code red,” as reported by The New York Times in December of 2022. Alphabet acknowledged that the rise of ChatGPT could potentially disrupt its cash cow business.
In an effort maintain dominance, Alphabet revealed its own A.I. chatbot to the world… “Bard.”
Unfortunately for Google, “Bard” made a mistake during the presentation, causing Alphabet’s share price to fall by double digits.
This wrong answer knocked more than $100 billion off of Alphabet’s market cap.
Now that might seem crazy, but Google is a search engine. You use it to answer your questions and find what you are looking for. If it’s feeding you the wrong information…. You won’t want to use it.
And the digital advertising businesses that provide a large portion of the revenue stream for these online search platforms, are taking note, which is why investors care so much.
Digital advertising is an extremely fast-growing industry that accounts for hundreds of billions in annual sales for online search engines like Google and Bing.
Source: eSignal
As you can see on this chart, the growth here is accelerating and turning parabolic.
Margins here are high as well, making digital advertising a very lucrative business to be in.
We’re seeing the same thing when it comes to other modern digital trends, such as data consumption, at both the retail and enterprise levels.
Source: eSignal
And as you might notice, 2022 is not yet included. This is because *Q4 2022 data hasn’t been completely tallied yet, so we don’t have complete access to the full-year 2022 data to add into these charts.
But after spending hours looking at recent earnings reports from the leaders in these industries, it’s clear that both trends (digital ad spending and U.S. mobile data growth) continue to experience secular tailwinds. This indicates that growth trends are expected to continue regardless of the macro environment.
So what are the implications?
There’s a lot at stake here for companies hoping to establish dominance in today’s digital environment with A.I.
They want to attract advertisers because advertisers are willing to pay big money.
But, as an investor, keeping up with the news and the share price volatility that’s playing out these days is enough to make your head spin.
The long-term potential of these various A.I. platforms is truly mind-boggling and without a doubt, whichever companies ultimately wins this race will make its shareholders exceedingly rich.
Unfortunately, with so much disruption at play, peering into the future and picking that winner is an impossible task.
Thankfully, you don’t have to.
You see, you can benefit from this trend without having to pick a winner.
There’s a little-known industry that is not only mission critical to the build-out of artificial intelligence systems overtime, it is also attractively valued in the present.
And unlike speculative technology companies, the blue-chip businesses that operate in this space spit out strong dividend yields as well.
What am I talking about? Data center REITs.
Buy the Brains of the Operation
Without data centers, A.I. is just a fancy set of algorithms without any data to crunch.
A simplistic way to think about it is this: data centers are the actual brain of artificial intelligence platforms.
I believe that data centers are the foundation of the ongoing digital revolution and data center REITs are the best way for conservative investors to capitalize on this trend.
Whether you’re talking about cloud migration, the rise of driverless vehicles, the 5th industrial revolution, or artificial intelligence… none of it is possible without data centers.
Every time that you ask ChatGPT or Bard something… those answers are being sourced from somewhere… And there’s a good chance that the data is being pulled from the mission critical infrastructure owned by data center REITs.
We recently recommended our favorite data center REIT to our paid readers as a part of the REIT Portfolio at the Intelligent Income Investor. So, if you are interested in getting in on the ground floor of A.I. but want to benefit no matter who wins out in the end, click here.
But for those that are not yet ready to become a member, check out my special briefing here to learn more. There’s a common thread between the fastest growing companies.
You want to invest in a win-win situation rather than win-lose scenario.
So why not benefit no matter who wins the A.I. battle?
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily