“Focus on artificial intelligence, cloud computing and microprocessors”
Artificial intelligence, cloud computing and chip companies: these are garments where investors must focus on the medium to long term. Truth&Business talked to Dries Dury, DPAM equity manager.
What is the value of thematic investments in a broader portfolio?
“There are two interesting aspects: the long-term performance and diversification. When you invest in a theme, you invest in companies that have the wind in their sails. However, from time to time, certain themes can be overvalued or overinvested. A multi-thematic approach offers the flexibility to tailor the portfolio to the theme that offers the best risk-return profile.”
Are green companies interesting?
that ofecology, where company valuations are generally very high, is not just an electric vehicle issue. Therefore, a good selection is essential here. In Europe there are very interesting mid-cap companies that offer “eco” solutions: this is the advantage of being able to invest globally and with different market capitalizations. We at DPAM have identified the protagonists of this theme: companies like There active in the production of heat pumps, Emptyin recycling and Spirax-Sarco in steam energy. Today, corporate-related stocks that go green are quite expensive, such as wind and solar energy. This is due to large inflows into clean energy ETFs. When valuations are too challenging, the first step is to find lesser known winners within the investment arena”.
Where are we on the artificial intelligence front?
“We are at the tipping point where artificial intelligence is entering our daily lives, even if we don’t always notice its presence. ChatGPT it is one of the most recent developments in Artificial Intelligence and it has spread rapidly. But there are already many use cases where AI will make people more productive. Today it already acts as a kind of aPersonal assistant for creative developers or designers, which can get a part of the job done in no time, increasing productivity in industries where labor is very expensive. Making code developers 20% more productive means huge savings. If you take a step back, what’s really driving the AI revolution is the cloud—basically, ultra-cheap, ultra-fast, on-demand computing power and storage. The managing director of Nvidia, Jensen Huangsaid it has accelerated AI computing a million times over the past decade with a prediction of a similar evolution in the future.
What is the most interesting investment theme?
Il cloud is probably the most important investment topic to consider today. AI can only operate in the cloud and therefore companies that want to adopt AI must switch to this system. This also means that costs are lower, more flexible and allow for shorter development cycles. Today, only 27% of all workloads are fulfilled in the cloud. Therefore, the cloud and semiconductors, which are necessary for the production of all technological tools that use and deliver AI, are currently the best way to take advantage of AI itself. But the matter goes much further: software companies that have cutting-edge AI capabilities are very attractive within this dimension. Semiconductor companies may be the best way to profit from this trend. To do AI today, you need enormous computing power, which means you need the best chips, and you need a lot of them.
What can we expect for the next five years?
A multi-thematic strategy allows you to shift investment weights based on opportunities. This has proved very useful during the time of Covid, where many of these trends have accelerated. Examples of this are the topics of e-commerce and gaming. Valuations of high-growth companies have fallen to zero due to rising interest rates, but corporate fundamentals remain solid.