Click here to schedule your appointment
Deciphering AI Investment: Expert Insights from Spear Invest | 9innings Podcast Recap

Deciphering AI Investment: Expert Insights from Spear Invest | 9innings Podcast Recap

April 18, 2024

Welcome to the latest entry on my blog, where I dive into the fascinating world of artificial intelligence (AI) and its investment potential. I'm Kevin Thompson, founder and CEO of 9i Capital Group, and your host on the 9innings podcast. Before we dive into the heart of today's topic, I'd like to remind you to subscribe to our channel for more insightful discussions (9innings Podcast)

Spearheading Success in Tech Investments

In a recent episode, I had the pleasure of hosting Ivan Delevska the CIO and founder of Spear Invest, ticker SPRX. I must mention that we owns some of the fund, and it's important to stay transparent and compliant with regulations.

Spear Invest has been making waves with absolute returns of 31% and 63% over the last 6 to 12 months, significantly outperforming the NASDAQ by 47% and 82%, respectively. I was curious about the factors that contributed to such exceptional performance, especially in the tech sector.

The Investment Philosophy Behind the Numbers

Ivana shared that their investment philosophy is rooted in a deep analysis of approximately 120 companies. This rigorous approach allows them to identify emerging trends before they hit the mainstream. Their bottom-up analysis has been particularly effective in capitalizing on significant trends early, especially in the AI trade.

Valuation Versus Market Cap: A Closer Look

As an investor, I've been concerned about the valuations in the AI sector, with companies like Nvidia at the forefront. Are these current valuations justifiable? Can we expect further growth in a market that's already highly valued?

Ivana clarified the distinction between market caps and valuations. The explosive market caps we're seeing are a result of a significant increase in earnings. When considering the multiples applied to these earnings, the valuations seem reasonable. According to Ivana, we're not in a bubble territory yet.

The Dynamics of AI Valuations

We delved deeper into the dynamics of valuations, considering the AI boost in companies like Nvidia and how it offsets cyclical businesses. Ivana explained that it's common to see higher valuations on trough earnings, and the current market conditions reflect this pattern.

Despite this, I remained skeptical about the potential for significant growth in companies with already substantial market caps. How can we justify further growth in such highly valued companies?

The Upside Potential in AI Stocks

Ivana addressed my concerns by emphasizing the need for earnings estimates to exceed current expectations. She discussed the forecasted growth in earnings for companies like Nvidia and the potential for a compounding effect in stock performance.

The Competitive Landscape and Investment Focus

The AI industry is rapidly evolving, and with it comes the potential entry of new competitors and the impact on margins. Ivana shed light on the innovation cycle and competitive dynamics in the data center segment, pointing out the complexities of manufacturing and the advantages held by companies like Nvidia.

We also discussed potential shifts in investment focus within the AI space and the broader market. Ivana explained their approach to portfolio construction, considering multiples and earnings to determine the level of constructive investment in the space. She highlighted the broadening opportunities in other sectors, such as utilities and copper miners, which are expected to benefit from AI advancements.

AI's Impact Across Industries

The energy requirements of data centers could significantly impact the energy sector. Ivana stressed the importance of valuation and identifying investment opportunities across the entire value chain.

We explored the potential applications and benefits of AI, from productivity improvement to marketing and drug development. The impact of generative AI on optimizing existing products and business models was a particularly exciting topic.

Addressing AI Concerns

As we wrapped up our conversation, I asked Ivana about her concerns regarding AI technology. She reassured us that while uncertainties exist, the development pace is gradual, and the long-term impact remains to be seen. The fears of AI taking over the world are unfounded, and the industry is still in its early stages.

Conclusion: Embracing the AI Revolution

I extend my heartfelt gratitude to Ivana for her invaluable insights and support. This conversation has shed light on the AI industry, investment strategies, and the potential impact of AI on various sectors. I encourage you to subscribe to the 9innings Podcast and engage with our content as we continue to explore the exciting world of AI investments together.

9i Capital Group Llc is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.