Capturing the Next Wave of Generative AI Beneficiaries

We’re pleased to announce the newest addition to our existing family of multi-asset, equity and alternatives strategies – The Markin Earnings Boost is an equity strategy that invests in the 50 Russell 1000 stocks that analysis indicates are best positioned to drive higher earnings per share or “Earnings Boost” from generative artificial intelligence (AI).

A key characteristic that sets this strategy apart for investors is that the potential earnings boost from AI is not yet reflected in the current prices of these stocks. Near-term AI beneficiaries like NVDA, MSFT, GOOGL, AMZN, and META have already seen substantial share price increases. The Markin Earnings Boost strategy focuses on the next wave of beneficiaries.

The Markin Earnings Boost strategy is appropriate for investors seeking to diversify their equity holdings based on the most promising next wave of AI beneficiaries and those who missed out on the initial wave of AI price appreciation (NVDA, MSFT, Google, etc.).

Markin Earnings Boost is accessible to advisors on Schwab, Fidelity and other platforms. Email our sales team or schedule a time to learn how you can access Markin Earnings Boost.

There is surging corporate interest in AI investments.

Direct AI beneficiaries in our AI Markin Earnings Boost strategy portfolio – 50 large- mid-cap US stocks set to benefit most from implementing AI in their businesses – have revised their 2024 capex expectations 28% higher as of November 6th, 2023. They are charging ahead even faster than expected. Why?

There are at least four fundamental reasons:

  • The newest generation of generative AI is easier than ever before for corporate America to deploy across a wide domain of knowledge worker tasks that allows firms to harness AI productivity at scale thus boosting earnings per share (EPS).

  • By reducing the cost and increasing the productivity of these tasks companies have a real near-term opportunity to: increase growth, or increase margins or reduce cost structures, or some combination of all three.

  • Competition for limited AI production and implementation resources in the economy ensures that there will be winners (who invest more intelligently and at greater scale) and laggards (who underinvest).

  • AI investments can materially move stock prices just as, or even before, the benefits are fully realized on the bottom-line so there is urgency among corporate leaders to act.

The impact of Generative AI on growth, the fundamental driver stock prices, is increasingly noted by institutional investors. Wall Street has come around to the idea that the impact of this generation of AI is going to be very large.

At the end of October, Goldman Sachs upgraded their long-run (2024-2034) GDP growth forecasts to reflect the impact of Generative AI. A key takeaway from Goldman’s research was that the US (and US companies) would be the dominant growth beneficiary with Japan next and Europe after that, while emerging markets and China would benefit the least.

The academic economics community is also reaching similar conclusions on the impact of AI on growth. Days after the Goldman Sachs research was published, the National Bureau of Economic Research (NBER) released a research paper titled: Economic Growth Under Transformative AI. It is one of the first papers from the economics community to comprehensively explore the various growth mechanisms of AI for the economy at large.

These economists reach the following conclusion: Based on existing economic models of growth and of 25 potential AI pathways considered, 21 lead to permanent growth or wage increases, of which 10 pathways produce growth/wage ‘explosions’.

The authors suggest that the impact is likely to be greater than the Industrial Revolution that began in 1820 in part because of the breadth of tasks AI can perform and because AI improves, conservatively, according to Moore’s Law (i.e., the cost of capital halves every two years).

Markin Earnings Boost Strategy:

  • 50 sector-neutral Russell 1000 firms offering an estimated 3.8 times more long-term EPS potential (than the median Russell 1000 stock).

  • The median EPS of Earnings Boost firms is estimated to be 72% higher than today compared with 19% for the median Russell 1000 stock.

  • Systematically tilted toward stocks with the highest expected EPS-boost.

  • Systematically managed to maintain diversification, near sector neutrality and tax-efficiency.

  • Easily accessible for advisors on Schwab, Fidelity, and other platforms.

Markin Earnings Boost is accessible to advisors on Schwab, Fidelity and other platforms. Email our sales team or schedule a time to learn how you can access Markin Earnings Boost.

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The Transformative Impact of AI for Economic Growth and Wages

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