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Hello, Reader,

Tom Yeung here with today’s Smart Money.

Last year, distracted driving resulted in over 315,000 injuries across the U.S. Just imagine: a driver can cover the entire length of a football field in a mere five seconds while texting. At a speed of 75 mph, that’s two city blocks unnoticed. This is a stark reminder that losing focus comes with dire repercussions—not only on the road, but in the world of investing as well.

Recent market disruptions have served as magnets for investor attention. From geopolitical conflicts to earnings reports and fluctuating oil prices, it’s easy to get sidetracked. Each news item matters, but the real story that demands your focus is the tidal wave of change brought by artificial intelligence.

Consultancy IDC predicts that AI will inject $22.3 trillion into the global economy by 2030, an amount surpassing India's annual output by a factor of five. This estimate seems conservative given the vast pool of human wage earnings—about $50 trillion yearly. As AI technologies advance, they’re poised to challenge that huge financial reservoir.

The takeaway is clear: while you're glued to the latest headlines, AI is fundamentally transforming the workplace and, consequently, the economy as a whole. So, let’s shift our gaze back to the road ahead and explore the potential AI holds—from job evolution to the enterprises fueling this transformation.

The Evolution of Employment

Think about the implications of a world where certain professions, such as tutoring or accounting, cease to exist. This isn’t far-fetched. AI is beginning to edge into roles traditionally deemed secure.

For instance, companies like Chegg Inc. (CHGG) and Nerdy Inc. (NRDY) have seen significant drops in their stock prices since the advent of ChatGPT in 2022. Reportedly, over 80% of high school students are now tapping AI for academic assistance, with nearly 95% using it at the collegiate level.

Accountants are similarly endangered. The pipeline of new graduates in this field is dwindling, while advancements in AI bookkeeping software are causing a wave of businesses to delegate routine tasks to programs with catchy names like “Digits,” “Xero,” and “Puzzle.”

Even upper management is feeling the pressure. In 2022, NetDragon Websoft, a gaming firm listed in Hong Kong, appointed an AI-style virtual CEO, Tang Yu, to lead its flagship subsidiary. Impressively, the company’s stock outperformed the Hang Seng index shortly thereafter. Notably, Tang Yu doesn’t require executive perks like corporate jets.

Some might scoff at the notion that AI could infiltrate blue-collar jobs, suggesting that trades are safe. For now, there’s some truth to that. But I urge critics to watch Unitree's humanoid robots, which perform impressive feats like dancing and backflipping. Last year, this Chinese firm produced 5,500 units and has its sights set on an ambitious goal of 190,000 annually.

Here’s the kicker: these robots can pick up new skills. Unitree even features an app store, “UniStore,” where users can download abilities for their robots, with plans for advanced job-related functionalities.

What this suggests is a future where every job, even those on the frontlines, could soon experience their own version of the “ChatGPT moment” as robots evolve with new capabilities.

This isn’t an impending disaster narrative; history tells us that similar transformations occurred during the 20th century. Back in 1900, roughly 40% of Americans were farmers; fast-forward to today, and that's shrunk to less than 2%. Technological advancements have led to wealth creation, even if much of it has concentrated in the hands of a few.

The key takeaway here is straightforward: if robots become the standard workforce, the most lucrative opportunities may belong to those companies producing the “tractors” of this new AI era.

Investing in the AI Future

So, what’s the best approach to invest in this AI revolution? A logical step would be to focus on the developers of robot and AI technologies themselves. The challenge? Most of these firms aren’t publicly available. OpenAI and Anthropic operate as private entities, while the few AI startups that do go public often come with sky-high share prices, if investors are lucky enough to gain access. Just last week, Unitree’s $900 million IPO was oversubscribed by over 8,000 times.

As it stands, average investors find themselves metaphorically locked out of this essential marketplace.

However, opportunities still exist for those strategically inclined. Consider Advanced Micro Devices Inc. (AMD). This chip designer had long been overshadowed by Intel Corp. (INTC) and nearly faced bankruptcy in the mid-2010s until current CEO Lisa Su turned the ship around. AMD's comeback was notable, marked by contracts with PlayStation and Xbox for its gaming chips, followed by the development of the highly successful “Zen” architecture required for AI datacenters.

Instead of bearing the hefty costs associated with leading AI companies like Nvidia, valued at $420 billion upon ChatGPT's arrival, savvy investors could acquire shares in AMD—essentially owning a piece of the engine driving the AI Revolution.

The Next Wave of AI Growth