AI investors should broaden beyond semiconductors, says Bernstein strategist

In a recent interview, Roosevelt Bowman, senior investment strategist at Bernstein Private Wealth Management, shared his perspective on AI investing strategies amid market volatility. Despite recent pullbacks in tech stocks, Bowman remains optimistic about AI investments but suggests a different approach than what has been popular.

Moving beyond the usual suspects

According to Bowman, investors should look beyond the conventional AI plays that have dominated headlines:

"Most of the focus has just been on semiconductors for cloud computing, the nuts and bolts," Bowman explains. This narrow focus worked well when market volatility was low, allowing investors to concentrate on a few names. However, recent market turbulence has made this concentration "quite painful for investors."

Where to look instead

Bowman recommends broadening AI investments into several key areas:

• Power infrastructure – supporting the energy needs of AI systems
• Cooling solutions – addressing the thermal challenges of data centers
• Skill-boosting technologies – tools that enhance human capabilities
• Big box retailers with substantial consumer data

The last category might surprise some investors, but Bowman sees significant value in companies that possess vast amounts of customer data – "the foundation of these models."

The data moat advantage

What makes retailers particularly interesting is their built-in competitive advantage:

"If you have all that data about where your customers are buying goods, when they're buying it, where your trucks are going, you can use machine learning and AI to optimize your sales and distribution process," explains Bowman. The key benefit? "You're not paying anyone for the basis of the model, which is the data."

Public vs. private opportunities

Investors don't need to limit themselves to private markets to find AI opportunities. Bowman sees potential in both public and private investments, noting that "the adoption for AI is varied across industries."

Even as small and medium-sized businesses increasingly incorporate AI into their processes, public companies beyond semiconductors and cloud computing can thrive.

Other sectors worth watching

Beyond retail, Bowman highlights healthcare as another compelling sector that offers a "dual play" – providing defensive positioning during slowing economic growth while benefiting from AI adoption in areas like drug discovery.

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