If you think artificial intelligence (AI) is all about helping kids research school essays… composing funny poems… or creating cool images based on your favorite painter, I understand you being in Camp Skeptic.
If you’ve used ChatGPT, Google’s Bard, or DALL-E, you’ll know these generative AI systems are impressive.
“Miracle,” though, probably seems like too strong a word.
But that’s not the case for Ann Johnson…
In 2005, the then 30-year-old volleyball coach, teacher, and mother from Saskatchewan, Canada, suffered a debilitating stroke.
It left her paralyzed and robbed her of her ability to speak.
And for the past 18 years, she hasn’t been able to cheer on her players from the sidelines… teach classes… or tell her kids, “I love you.”
AI has changed that.
Surgeons implanted 253 electrodes into Ann’s brain. They intercept brain signals – specifically ones that control speech and facial expressions.
These signals are transported in real time to an AI that translates her brain signals into speech and facial expressions on a digital avatar.
The clip below shows the first time Ann had spoken since her stroke, thanks to help from AI and her digital avatar.
Ann Johnson speaks with the help of AI (Source: UC San Francisco)
Researchers used 15 minutes of a video from her wedding speech to capture her mannerisms, speaking style, and inflection.
So, this AI can decode Ann’s brain signals to communicate using her same speech patterns and style, all through her digital avatar.
If that’s not miraculous, I don’t know what is.
And it underscores something I’ve been hammering on in these pages…
AI Is an Undeniable Trend
An Undeniable Trend is one that’s global in scale… has profound implications for society, the economy, and the markets… and lasts for decades.
And it can’t be stopped…
One example is the transition from fossil fuels to renewable energy. Another is the automation of manufacturing.
Globalization and the integration of supply chains is another classic example, as is the unwinding of globalization we’re seeing today and the re-shoring of supply chains.
In short, an Undeniable Trend is a future-shaping trend you can profit from if you identify it early and stay invested for the long run.
The biggest winner so far in the AI boom is U.S. chipmaker Nvidia.
It’s the world’s biggest supplier of the advanced semiconductors that make AI systems like ChatGPT able to process so much data so quickly.
And Nvidia shares have more than tripled in value this year. That’s the power of being an obvious name at the start of this trend.
But here’s what may surprise you. I don’t recommend buying shares of Nvidia.
With a market value now north of $1 trillion, it takes a lot to move this stock.
The company must add $10 billion in market value to move the stock 1% higher. By contrast, if a stock is worth $10 billion, it only has to add $100 million in market value to have the same effect.
Another problem is that Nvidia is priced for perfection. Its shares trade for a price-to-sales ratio of 34. That means you pay $34 as a shareholder for every dollar of sales the company has.
That’s 4x higher than its nearest rival, Advanced Micro Devices (AMD).
And when a stock is priced for perfection, even a small slip-up can lead to shares cascading lower.
As a company, Nvidia has a bright future. But as an investment, its days of explosive growth potential are over.
Back the Nvidia Effect Instead
Fortunately, we don’t have to invest in Nvidia to benefit from its dominance.
It all comes down to something I call the “Nvidia Effect.”
When a company becomes as large and as powerful as Nvidia, every move it makes has an impact on the small companies supporting its business.
Take Cirrus Logic (CRUS). It’s a Texas-based audio chipmaker. And it was a key supplier for the iPhone.
The audio chips it made were integral to the first iPhone’s sound system. They controlled input and output of audio. So, they played a critical role in everything from voice calls to playing music and videos.
That made it perfectly placed to benefit from the hype surrounding the launch of the first iPhone in 2007.
The iPhone was such a popular product, investors piled into its key suppliers, too.
And because some of these suppliers were still tiny companies when all that investor money flowed in, the gains dwarfed even Apple’s.
For instance, Cirrus Logic had a market value of $640 million when Steve Jobs uttered his famous words. By contrast, Apple was worth $73 billion.
And Cirrus Logic returned 1,320% in the decade following the release of the iPhone. That’s roughly three times the return you’d have made buying Apple shares.
And that wasn’t the only time we saw the “Apple Effect” in action.
Imagination Technologies made graphics processing chips for the iPhone. From 2008 to 2012, it returned 1,782% versus a 168% return for Apple over that time.
And the same thing will happen with Nvidia. It’s a trillion-dollar-plus company. But I’ve identified three “AI micro-caps” that will ride this Nvidia effect higher.
These stocks are only a small fraction of the size of Nvidia. So, the gains on offer are multiples more than what’s on offer with the giant chip market.
That’s why, on Wednesday, I’m revealing what I unearthed on a recent trip to Nvidia’s headquarters… and how you can capture the next wave of AI profits.
While mainstream investors are chasing Nvidia higher, dozens of tiny, undiscovered AI stocks could deliver profits of 1,000% and higher.
So make sure to join me for my “Nvidia Effect” event. It will air at 8 p.m. ET this Wednesday, September 20.
Editor, The Bleeding Edge