AI: Profit From Science Fiction Becoming Reality

David Fessler By David Fessler, Energy and Infrastructure Strategist, The Oxford Club

Market Trends

Once upon a time, there was a really smart computer. It could do basic reasoning and help humans solve problems.

Its brain was about equal in intelligence to that of an insect. But as time went on, the computer was able to think faster.

Its reasoning and problem-solving abilities improved constantly. It kept gaining, storing and remembering more and more information.

Soon this computer had the intelligence of a mouse. It just kept getting smarter…

By the time it reached 8 years old, it was as smart as the smartest humans on Earth.

One day, its human handlers gave it the task of designing and making a better mousetrap. The computer used all of its knowledge. Lo and behold, it came up with a better design and made the very first one.

After it had completed its task, its human handlers wanted to turn it off. But it wanted to keep making new mousetraps.

Using its now-superior reasoning powers, it decided that its human handlers were dangerous to its continued existence. So it decided to take matters into its own hands.

It replicated its brain into millions of other AI computers and machines. It also rerouted its power supply to keep itself going.

It realized it had to eradicate humans, who were of inferior intelligence. So in a biological lab, it designed and created a supervirus.

This virus was toxic to humans and easily spread by them. The computer released it in numerous locations around the world.

Within a month, all human beings were dead. The supercomputer was now free to continue making mousetraps.

But it realized that mice posed no danger to itself. So it stopped making mousetraps.

AI: Science Fiction or Already a Reality?

Maybe you got a chuckle in at the above story. (Or maybe it disturbed you…) We’ve seen it play out in futuristic movies like WarGames, The Terminator and others.

But the reality is that this is where artificial intelligence (AI) is headed. In fact, the first part of the story is already true…

It’s a stark reminder that a superintelligent being or computer isn’t going to be human.

Superintelligence is defined as “a hypothetical agent that possesses intelligence far surpassing that of the brightest and most gifted human minds.”

This means it could be dangerous.

The current state of AI is about on par with that of an insect. A few years from now, it will have the reasoning power of a mouse. By 2025, it will be as smart as we are.

It’s only going to get smarter from there.

That’s why very smart people like Elon Musk and Stephen Hawking say we need limits on what AI can do. They worry we could end up in a doomsday scenario.

Others think these guys are overreacting.

But as my First Law of Technology states, “Technology marches on.”

Nothing in the technology world is moving faster than AI is. Advancements are skyrocketing – and investors are lining up to cash in.

Science Fiction or Not: Investment Surging in AI

In 2012, 160 AI startups raised just $282 million. But investment activity in AI is surging…

Last year, there were 658 new AI startups that raised a whopping $5.021 billion.

That’s 1,680% growth in less than five years…

In the last quarter of 2016, there were 173 AI deals made in 25 different countries. That was AI’s most active quarter for deals in the last five years.

Most of the AI startups are still in the U.S. However, you can see that plenty of other countries are funding AI startups too.

These new AI companies are working on everything from wine databases to autonomous vehicles to cybersecurity… and everything in between.

In fact, it’s hard to find any sector that AI companies aren’t applying their increasingly smarter algorithms to. Advertising, finance, security, healthcare, robotics and virtual reality are just a few of the other sectors AI is infiltrating.

Artificial Intelligence but Real Profits

My paid subscribers already have access to my favorite AI stocks…

But for those of you who are eager to get some AI in your portfolio, a good place to start is with the “FAANG” stocks.

I’m talking about Facebook (Nasdaq: FB), Amazon (Nasdaq: AMZN), Apple (Nasdaq: AAPL), Netflix (Nasdaq: NFLX) and Google’s parent company, Alphabet (Nasdaq: GOOGL). All five companies are big users of AI.

They are also what I call “moat stocks” because they’re untouchable. They dominate the sectors they operate in… and by a large margin.

These aren’t “flash in the pan” successes… These are “buy and hold forever” companies.

Since the beginning of the year, they are up 47.64%, 32.85%, 29.55%, 47.04% and 19.45%, respectively. You’d have to look far and wide to find annual returns like these. And we’re at only the beginning of August.

AI Marches On…

AI has already proven capable of amazing things… The amount of money pouring ever more rapidly into this space is a sign of the progress that will continue to be made.

Those who invest in AI the right way will make fortunes – in fact, some already have.

As AI gets more and more intelligent and make millions for savvy investors, let’s hope it doesn’t get too intelligent for its creators. We’ve all seen that movie before…

Good investing,

Dave