Artificial intelligence confuses people. We think about it and it says, OK, the machines are better than we are. They know more.
There's truth to that. But that doesn't make it an economic decision.
After sitting down with the unbelievably animated and fantastic Gary Dickerson from Applied Materials (AMAT) -- as opposed to the unbelievably fantastic not-all-that-animated Martin Anstice from Lam Research (LRCX) , a competitor on some product lines -- I am thinking that we are way too small in figuring out the power of artificial intelligence.
We don't understand that it might hold the key to all of sales if we just know how to harness it.
Let me give you an example. We know there is a monster amount of data out there, a collective grouping of all our wants and needs and desires all expressed in data. We also know that data interpretation can allow us to figure out much better than intuition how to do things.
I think the best comparison is to sports. We all marvel at Ted Williams because he had a .400 batting average for a season. That means, however, that .600 of the time he didn't get it right.
That's an intolerable result if you are in any endeavor and yet we consider it the ultimate in a brutally open and competitive sport.
So, the best a human can do is .400.
What would happen if we had artificially intelligent players? I would argue that they would all hit 1.000 and we would simply have to figure out how to keep the ball in the park.
Artificial intelligence is allowing companies to hit 1.000.
Stay with me because this is the leap of faith that allows me to think we could still be early adopters.
Right now only a few companies have really harnessed AI in a way that can make them 1.000 hitters. I would argue that Netflix (NFLX) , Amazon (AMZN) and Spotify may be the only ones that have been able to think what the next pitch is going to be and be ready for it. Therefore, they know what is demanded ahead of when that pitch hits the plate.
Now we could argue that it is game, set, match for these companies, and I pick on them because they are three of a handful of companies whose bills I pay without thinking about it. (Apple (AAPL) storage, Costco (COST) and NFL.com being the others and the latter is so I can hear Merrill Reese call Philadelphia Eagles games out of market.)
But in fact it can't be game, set, match. The total addressable markets of those companies are too big to let them win. There has to be tremendous pushback by incumbents and the only way they can fight back is to use artificial intelligence themselves.
That means they need more chips -- Nvidia's (NVDA) are the best, just face it they are -- so they need more communications equipment, more data centers and more semiconductors and more semiconductor equipment to compete and bat 1.000.
Walmart needs to bat 1.000 against Amazon. The networks need to bat 1.000 against Netflix. The entertainment industry needs to bat 1.000 against Spotify. Apple needs to start batting 1.000 in music. Walmart (WMT) needs to start batting 1.000 against Amazon. Procter & Gamble (PG) needs to bat 1.000 against Unilever (UN) (UL) .
And on and on and on.
That means it really is different this time. It really isn't cyclical. It really is secular, which makes owning big data-related stocks in any way shape or form the place to be. Not for now. Not for next quarter.
But I would argue, for years to come.