Growth of investment attractiveness of the companies working with artificial intelligence is inevitable. Philip Laffont, who is the founder of Coatue Management hedge fund considers that it was the biggest and the most interesting trend since the Internet had been invented.
According to Philip Laffont, who is the founder of one of the leading hedge funds of the world Coatue Management, technology of artificial intelligence will improve the financial situation of american processor giant Intel, which cannot execute planned targets for 15 years. Moreover, they could push social network Twitter to increase the revenue for the sum of $100-200 billion.
At a conference of investments advisers of Top Advisors Summit, which was held in Las Vegas by the Forbes magazine and the SHOOK Research organization, Philip Laffont urged all audience of the managers operating with the sums exceeding $500 billion to catch their interest to AI technologies and to stock exchanges as the artificial intelligence was changing all their business already then.
"If you take out at least one lesson from last day of a conference, then it will sound in following way: it is necessary to invest in artificial intelligence technologies, the corporate equity of the companies, which are engaged with them, have to be in your investment portfolio and you need to talk about them to your clients. It is really the biggest and the most interesting trend since the Internet has appeared" — Philip Laffont said.
The Coatue Management hedge fund outstripped revolution in the sphere of artificial intelligence technologies. It has possessed the large equity stakes of innovators and pioneers in this industry, for example, of the developer of video cards and Nvidia processors, Google corporations (Alphabet holding) and the Equinix companies. Laffont plans to take away 20% of Coatue Management hedge fund’s investment portfolio under shares of the companies which are engaged in AI technologies and data-processing centers and semiconductors connected with them. Such companies as Intel, Twitter and AMD which overcame long difficulties in the market recently, conduct absolutely other policy.
Since the beginning of the 21st century the Intel corporation was like a"dead-weight" on the stock exchange as its actions hardly "moved". Nevertheless, Laffont considers that now the company slowly changes. Inte gains about 50% of its total income with help of creation and service of data-processing centers. Moreover, soon personal computers’ sales, where the company was leading will bring only a small part of its total profit. In spite of the fact that the combination of business strategy of Intel changed for the best, its actions just now begin to reap the fruits of these changes.
Artificial intelligence technologies can solve also some problems of social network Twitter with which the company deals from the moment of a share issue on the free market in 2012. While as a result of the first public sale of shares market capitalization of Facebook increased for more than $500 billion, the estimated cost of Twitter continued not to exceed for $25 billion as the appeal of this social network reduces randomness of a news feed. Laffont considers that the CEO and one of founders of Twitter- Jack Dorsey,has already began to use artificial intelligence technologies on social network to control content, relevant for users. AI technologies will help to fix problems with chaos in a news feed which disturb users of social network and advertisers.
"It is the long-term project with a very interesting creator which belongs to artificial intelligence technologies in the same way as we are" — Laffont said. Whether "Will be able Twitter to increase in five or ten years the revenue to $100 billion or $200 billion? Absolutely" — he added. According to him, Advanced Micro Devices, is a one more "lagging behind" company from this industry, that can agree to sell to other companies the semiconductor production technologies. One of key components of his confidence in success of artificial intelligence technologies is infrastructure, which has increased the value of the calculations based on algorithms.
"How is it possible to start an algorithm if there is no data?" — Laffont has noted, when it came about acceptance of innovations. Thanks to the centers of storage and data processing, the growing computing power and large volumes of memory practically any company really can effectively use artificial intelligence technologies. Philip Laffont considers that data-processing centers would become a successful niche in this industry and as the proof more than a half of all capital investments in DPC referad to the plans for investment which were recently opened by the Facebook company.
According to the last quarterly reports of Coatue Management, the hedge fund holds shares of the Twitter company worth more than $500 million. In the report for 2017 information on the stocks AMD and Intel which were at the disposal of hedge fund was not specified. Besides, reports show that Coatue Management which assets are estimated at $17 billion holds shares of such giants of the industry of AI technologies as Nvidia and Alphabet and also such companies as Alibaba, Amazon, Apple, Facebook, JD.com and Netflix. Besides, the hedge fund is a holder of the shares of the chips’ producer Broadcom Corporation.
As for wider technological sector in which the Coatue Management hedge fund is one of the largest and leading investors, Laffont estimates the situation positively in the market. Revenue of such giants of this industry as Apple, Alphabet and Facebook, now at 14-17 times more, than their expenses. "It is yet not mad figures" — he said. In 2000 when Laffont created Coatue Management, the profit of the technological companies was for 50-100 times more, than expenses.
The Coatue Management hedge fund adheres to the following strategy: an investment portfolio of fund there have to include shares of the large companies and leaders of the industry,such as Amazon, Facebook and Google and also actions of several smaller but at the same time interfaced to big risk of the technological companies. Risk in that case is obviously higher, but also profit in case of success is bigger. Laffont said:
"Speaking about technologies, I recommend to keep an open mind and to be let to adventures".
In the next years such active funds as Coatue Management, can get an additional profit.
Recently the IPO of the technological companies as the so-called companies - unicorns, that are the companies whose estimated cost quickly rise up to $1 billion, remain private are seldom carried out to the USA. Laffont considers that the situation will change soon. According to him, the markets of the IPO will become more excited. Thus, skilled investors who are able to separate winners from losers will have more opportunities. "We consider that more companies will begin to issue stocks on the free market owing to what Darvin’s laws on natural selection will act on the market again" — he said.
Coatue Management invests not only in the American companies. According to Laffont, investing in China it is very perspective. For the last few years its hedge fund became the investor of several public and private Chinese technological companies. For example, Coatue Management financed private company of Didi Chuxing, the Chinese analog of Uber, which, according to Laffont, is much larger, than his American competitor. As for the public companies, Coatue Management is a shareholder of Alibaba and JD.com. According to Philip Laffont, the Chinese companies from the sphere of technologies are at one level or are advance in development of the American colleagues due to the lack of the competition in such spheres as payments, commerce and logistics. Also, thanks to the fact that the Chinese government actively supports introduction of innovations.
Laffont also let know that his hedge fund will consider other large emerging markets. "Speaking about technologies, India was always "a poor relative" of China" — he said. Nevertheless start 4G-and 5G-communications can at last allow the technological companies to win the markets. However in the USA, the start of 5G will not basically change rules of the game. Speed of 5G will not replace fiber-optical communication which still wins at the expense of the speed of reproduction of video. According to annual reports, Coatue Management is an investor of such telecommunication companies as Charter Communications and Liberty Broadband.
How did Philip Laffont come to a conclusion that 4G-and 5G-communication will have success in India? He investigated growth of the Netflix company which shareholder is his hedge fund. Along with Facebook, Amazon and Google the Netflix company belongs to four largest technological companies on the stock exchange, known under the general abbreviation of FANG. "I decided to look narrowly at the market of India and to learn how the country is adjusted with technologies, having read reports on revenues of Netflix" — Laffont said. He considers that the set of the successful ideas came to his mind only because the fact that he remembered what tolld the large technological companies in their reports.
sourse: Forbes