Investing In The Trend: Data Is The New Oil

It is no secret that artificial intelligence is all the rage at the moment. A smart way to capitalize on this trend, according to tech investor Mark Hawtin, is to play the data theme as a way to jump on the trend.

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In the past few weeks, artificial intelligence has taken Wall Street by storm, with ChatGPT going viral and causing investors to become interested in what stocks could benefit from the new technology.

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AI plays include Microsoft, which backed ChatGPT, Alphabet, which developed a chatbot, as well as semiconductor firms such as Nvidia. The ChatGPT program was created by San Francisco-based OpenAI, a company that is backed by Microsoft and can answer questions, writes essays and does many other things.

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The investment director at Zurich-based GAM Investments, Hawtin, has identified an additional way to get into the game, and that is by using data.

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"If we are going to make an assumption from a business perspective that data is the new oil, then it is absolutely necessary, it is the edge in business, so we need to store that data," he told Trade Algo last week in an interview.

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The amount of data generated every year is expected to grow by between 30% and 40%, according to Hawtin, who went on to say he likes data storage companies.

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According to him, these chatbot AI products use a huge amount of data during their learning process. That is why ChatGBT 4.0, which has not yet been released, will use a massive multiple of the amount of data that the existing [version] 3 product users are used to.

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It is anticipated that more of this data will be required to be stored in the future, according to Hawtin.

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Stock picks

The stock that he likes the most with the data theme is? Data storage company Seagate, based in the U.S.

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“A lot of people are going to say, 'Oh, it's a hard disk drive manufacturer that's definitely out of date,' that it's hard to understand. Obviously, it is - we don't see it anymore on the laptops we use nowadays. It is estimated that 70% or more of the data in the world today is still stored on hard disk drives," Hawtin said.

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FactSet reports that analysts covering Seagate shares have given it an average upside potential of around 6%, according to the company.

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The fact that Hawtin isn't the only one to flag hardware companies as a place to invest in AI is not significant.

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According to Morgan Stanley, Apple, Seagate Technology, Dell, and IBM are some of the companies that could benefit from the emergence of generative artificial intelligence over the next few years.

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“Generative AI is expected to drive an increase in demand for higher-performing computing (GPU-enabled servers, AI-enabled central processing units for PCs and more powerful storage (flash and hard disk drives) over a multi-year period,” analyst Erik Woodring wrote in a note on February 24.

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The analyst also mentioned Nvidia as a potential stock to invest in when it comes to the AI buzz.

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"I think that Nvidia is a really good way to get exposed to this field," he said in response to my question. “It is a bit of a paradox, but the thing about Nvidia is that it processes a lot of data in parallel, which is incredibly important, while the CPU companies AMD and Intel do serial processing of data. That's the reason why Nvidia has become so important to many of these applications in recent years," he explained.