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Charles’ Note: Say what?

The massive bull market in tech has followed one core, unwavering idea: AI expanding into everything and that investment in the space would be measured in trillions of dollars. 

Yet Meta Platforms (META) – one of the biggest players in the space – just announced it was no longer hiring for its AI division. 

Now, some of this might just be a well-needed pause. 

The company has invested literally hundreds and hundreds of billions of dollars expanding its AI footprint. It probably makes sense to take a minute and digest the investments already made. 

But it also raises questions… 

What Big Tech has already overspent on AI, or at least on this stage of it? 

What does that mean for Nvidia (NVDA), Microsoft (MSFT), or Alphabet (GOOGL)? 

Most importantly, what do we do with our money?

InvestorPlace Senior Investment Analyst Eric Fry has a thing or two to say about that. 

Eric was an early adopter to AI, writing about it years before it went mainstream. Now, as he’ll explain, the best opportunities in AI aren’t the most obvious. 

Take it from here, Eric! 

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One Adopts AI, One Survives It – 2 AI Plays to Buy Now

By Eric Fry, Senior Investment Analyst, InvestorPlace

Freeze!

No more.

Meta Platforms (META) is no longer hiring for its new artificial intelligence  division, sending shock waves through the AI space.

This halt comes after the tech giant’s costly hiring spree this summer, where it scooped up prized researchers like Alexandr Wang, the former CEO of Scale AI… Nat Friedman, the former CEO of GitHub… and Ruoming Pang, the former head of AI models for Apple (AAPL).

These big names are a part of Meta’s Superintelligence Labs, its new AI division. But now it seems that the poaching has stalled.

The company says the pause is due to “basic organizational planning,” which follows its Tuesday announcement that it’s splitting up the Superintelligence Labs into multiple departments.

This hiring freeze and double-reorganization comes amid Meta’s out-of-control AI spending this year. (Some of those aforementioned researchers’ signing bonuses reached $100 million or more.)

We need to view every new investment opportunity through the lens of artificial intelligence. One way to do this is by focusing only on companies that apply AI in cost-effective and/or market-leading ways.

Meta fails in that regard, spectacularly.

But the big spender is still a major AI player and a well-known name. So, it’s most likely in many investors’ portfolios.

Trying to capitalize on AI by rushing toward the hottest, hyped-up AI plays – like Meta – is an easy way to get burned.

Instead, I recommend looking for the best-of-breed companies that fall into four distinct AI investment categories:

• Investing in AI
• Investing alongside AI
• Investing in AI survivors
• Investing in stealth AI

Today, let’s dig into those last two categories, and see what companies would be a good investment.

Let’s dive in…

Investing in AI Survivors

AI is not a death sentence for every business on the planet. Some companies provide a product or service that is resilient to AI disruption, at least for now. These “future-proof” enterprises produce goods and services that AI cannot replicate or replace.

Examples would include companies that operate in major industries like…

• Agriculture
• Energy
• Mining
• Hospitality and travel

Some companies also possess a future-proof quality because they provide “affordable luxuries” like farm-to-table foodstuffs, artisanal home goods, premium coffees, or high-end spirits.

Although silicon chips, supercomputers, and data center clusters will breathe life into the AI age, they will not define it. The “premiumization” of innately human elements might.

Dutch Bros (BROS) belongs firmly in the AI Survivor category.

While Dutch Bros may leverage AI tools for operational efficiency, its product – coffee served with human connection – is fundamentally AI-proof.

Dutch Bros is a rapidly growing drive-thru coffee chain that’s building a fiercely loyal fanbase across America.

The Oregon-based company isn’t selling just coffee and energy drinks – it’s selling human connections. 

Dutch Bros baristas are trained to deliver a friendly, personal, upbeat “vibe” that forms an emotional bond with customers, especially among millennials and Gen Z.

You can’t automate that kind of empathetic, unscripted interaction.

No AI chatbot or robotic arm can replicate the charm of a barista remembering your drink, joking with you at the window, or brightening your day with a quick conversation. 

The coffee is the medium, but the experience is the product, which is why customers become so loyal to the brand.

That said, AI will increasingly support the company’s operational processes like inventory management, staffing, site selection, and mobile app performance. But these enhancements are not visible to the customer and do not change the fundamental value proposition.

Just as coffee survived the internet age intact, it will survive the AI age – possibly even thrive as humans seek real-world connections in a digital-first world.

Investing in Stealth AI

Stealth AI companies – you can also call them “AI Appliers” – are quietly adopting AI technologies to boost efficiency, productivity, and profitability. These companies may not scream “technology,” but they could profit enormously as they deploy AI technologies throughout their operations.

Many of the companies in this category may appear old-school or even “boring,” but their ability to integrate AI into existing business models could help them scale revenues and profit margins significantly.

Take retail, for example.

Like I said earlier, Dutch Bros qualifies here.

But I also have my eye on the “Amazon of South Korea.”

It’s revolutionizing e-commerce in the country. 

This company is developing and testing ways to enhance its businesses with AI and other machine learning (ML) technologies. Some AI-related focus areas include…

• Personalized product search and recommendations
• Fulfillment center automation and optimization
• Workflow management
• Cloud computing and AI infrastructure

It’s also developing technologies to enhance various aspects of its e-commerce and logistics operations (and patenting them to lock in their value). The number of this company’s global patents have tripled to over 2,100 in the last four years.

This year, Fast Company named it one of the World’s Most Innovative Companies for harnessing “the power of artificial intelligence (AI), robotics, and automation to create the future of global commerce.”

You can learn all of the details about this stealth AI play – ticker symbol and all – here.

Regards,

Eric Fry

Senior Investment Analyst, InvestorPlace