The tech giants to benefit from AI bullishness: Strategist

Chip company Arm Holdings' (ARM) disappointing 2025 forecast could be signaling slowdowns in AI demands. Big Tech companies like Meta (META), Microsoft (MSFT), and Alphabet (GOOG, GOOGL) have all announced major investments in building out their AI infrastructures. While the plans show confidence in the future, will they actually pay off?

Bokeh Capital Partners Founder and Chief Investment Officer Kimberly Forrest joins Morning Brief to give insight into the AI sector and discuss which companies are in the best position to actually benefit from AI investments.

When asked about when investors will see real payoffs from these big investments from AI, Forrest says: "Building out the data center is part of it, then you're going to have companies like Meta, Microsoft, and Amazon (AMZN), and everybody else is going to pile in and start using the generative AI to maybe increase productivity... And I would look for who do you think is most likely to benefit from using generative AI. And we've just mentioned them, right? Amazon, Meta, and Microsoft, and to me Microsoft is really probably [in] the best position because they'll get people to actually pay for it, not just advertising dollars."

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This post was written by Nicholas Jacobino

Video transcript

Well arm holding shares under pressure today after its full year guidance, missing the street's expectations and feeling concerns about the A I slowdown in companies.Taking a hit for what investors need to know.Kimberly Forest, Boca Capital Partners founder and chief investment officer Kimberly.It's great to see you again.So let's start with what we were just hearing from Jared and kind of can be that to what is now that seems to be within the A I space right now, because Arm was the latest company to not really live up to those sky high expectations when it comes to some of those tech leaders when it comes to the A I space.And yet we've seen this rotation into a more defensive type set up when you take a look at the out performance of utilities and consumer staples.What is that, then signal to you at this point in terms of that market rotation?Sure.Well, it's a couple of things.Probably the biggest thing that is, um, in every investor's mind is is a I for real, right, because we've now had intel, a MD and arm all kind of disappoint.Um, especially with respect to the amount of, uh, their revenue coming from a I.And if you are a long time technology watcher, this should not be a surprise to you because technology doesn't spend, um, whenever it's being developed, solely just moving upwards into the right at a 45 degree angle, right on revenue.That doesn't happen.It's more lumpy.Um, companies will build out a data centre and then pause and then build some more and pause, and we might be hitting this.We'll know whenever and video reports next week, but I don't think you should throw in the towel now.As for the defensive, it does feel like people are anticipating a recession, and they often do pile into consumer staples and utilities, thinking, Well, the consumer has to buy those.You know, One of the the common threads that we've heard for companies that are most uh, benefiting from generative A I right now is that they're all gonna continue to invest aggressively and for meta platforms.I think what they said on theirs was Look, this first quarter just shows one instance how we're going to continue that incremental investment going forward are are we witnessing right now?Perhaps the I don't want to say the first cracks in the generative A I trade because it still is an investment that these companies are putting forward.But when should investors expect some of those investments the Capex to actually pay off?Sure.Well, I mean, you bring up an excellent point right now, people have been solely able to invest by investing in NVIDIA.I mean, let's just call it for what it is, right?And some of the other semis got a boost from it.But as I said, you know, building out the data centre is part of it.Then you're gonna have companies like Meta, um, Microsoft and Amazon, and, uh, everybody else is gonna pile in and start using the generative a I to maybe increase productivity.So I think that's an excellent question that you answer or ask, and I would look for Who do you think is most likely to benefit from using generative A I and we've just mentioned them, right?Amazon, meta and Microsoft, And to me, Microsoft is really probably the best position because they'll get people to actually pay for it, not just advertising dollars.So companies can who wanna write better emails or sift through you know, their stores of knowledge and figure out what they have in their in their databases can use generative A I to mine that and maybe become a better, more productive company.Kimberly.How much do does Fed cutting play into this or or?Or is this the sector just given the hype, given the excitement and given those real use cases, at least for some of these names that it almost doesn't matter really what the Fed does in the short term?Well, I think if you're a short term investor, you don't really care what the Fed is doing.I mean, you'd like a a rate cut for sure, because that would help out your multiple.And you know, you your discounted cash flow and all the math behind it rests on that 10 year, um, Bond and what it trades at the US Treasury tenure.That being said, um, I, I prefer to be a much longer term investor than you know, the next 10 minutes or even the next year, because it does take time for a I and a whole lot of um, trends to kind of play out through the investing.Uh, timeline.Kimberly Forest.Who was the Boca Capital Partners?Founder and chief investment officer.Kim, thanks so much for taking the time today.Thank you.