Guide to Investing in AI
Trish Regan is one of America’s most recognized financial journalists and digital media hosts. An award-winning reporter, author, television personality, and speaker, Trish is a leading economic and political thought leader who helps viewers to better understand the most critical issues facing the economy and American business today. With extraordinary access to newsmakers and industry sources, as well as a knack for anticipating opportunities and risks in investing, Trish leverages her knowledge of how the mainstream media works to enable subscribers to best understand the information moving markets.
Trish is the Co-Founder and Executive Editor of 76research. She is also the founder, owner, and host of the daily livestreamed Trish Regan Show with more than 16 million views per month. Prior to founding 76research with longtime friend Rob Hordon, Trish anchored some of the most highly rated financial programs at America’s most noted financial networks including CNBC, Bloomberg, and most recently, Fox Business News.
Throughout her career, Trish has interviewed numerous heads of state, including multiple U.S. Presidents, foreign leaders, Fortune 500 CEOs and other institutional, charitable, and government leaders.
Trish credits her start in journalism to her fifth grade position as school correspondent for her local New Hampshire newspaper. But, while Trish showed an early interest in reporting and writing, it wasn’t until years later that she chose to make journalism her career. In fact, she originally intended to pursue a career in finance and worked as an analyst in emerging debt markets at Goldman Sachs while a student at Columbia University. Fluent in Spanish, Trish focused primarily on Latin American sovereign debt markets including Argentina, Mexico, Venezuela, and Brazil, but when Bloomberg Television offered her an opportunity to work as a correspondent, she made the jump into financial media.
Beginning at Bloomberg in 2000, Trish was on the front lines as the dot-com bubble burst. She covered its aftermath from Silicon Valley and San Francisco as a correspondent at MarketWatch before moving back to New York to work as a correspondent for CBS News. In 2006, Trish returned to her financial roots as an anchor on CNBC’s top-rated daily markets program The Call where she reported on the 2008 financial crisis in real time. While an anchor at CNBC, Trish also reported business news for NBC's Nightly News and The Today Show. In addition, she produced and hosted the two most highly rated documentaries in CNBC's history – Marijuana Inc and Marijuana USA, which investigated a massive and fast-developing underground industry. Trish predicted that industry would soon become mainstream in her book Joint Ventures: Inside America's Almost Legal Marijuana Industry, published by Wiley & Co. in 2010.
In 2011, Trish went back to Bloomberg Television to anchor the network's afternoon market close coverage as host of Street Smart with Trish Regan. While at Bloomberg, Trish was the network's main political anchor for all political television coverage of the 2012 election, including both the Republican and Democrat conventions and the election itself. From 2013 through 2016, Trish also worked as a front-page economic columnist for USA Today, writing on the biggest trends in business, markets and the economy.
In 2015, Trish left Bloomberg Television to join Fox News and Fox Business as the anchor of her new program The Intelligence Report with Trish Regan during FBN’s market hours. She would later move to an evening program and become the only woman in cable TV at that time to host a primetime show. Trish Regan Primetime grew 8pm ratings to a level never before seen at Fox Business.
While at Fox, Trish Regan also anchored two Republican Presidential debates – making history as part of the first all-woman team, with colleague Sandra Smith, to anchor a Presidential debate. She also appeared as an economic and markets contributor to all Fox News programming and was also a guest anchor on Cavuto, Fox and Friends, The Five, and primetime programming. In addition, Trish anchored all primetime coverage of the 2016 Democrat and Republican conventions for Fox Business and was a co-host alongside Neil Cavuto, Maria Bartiromo, Lou Dobbs and Stuart Varney for the network's main political events. Trish left Fox in 2020 and began work on the creation of her own digital media enterprise which debuted in August 2020. Her focus now is her own program and 76research, although she still appears regularly on other platforms both in cable news and in digital media.
Trish graduated with honors from Phillips Exeter Academy before going on to study opera at New England Conservatory and graduate cum laude with a degree in history from Columbia University. While at Exeter, Trish was the first-place winner of the Harvard Musical Association’s Competition for Excellence in Music, becoming the first singer to win the top prize since the organization was founded in 1837. She later studied opera and German at The American Institute for Musical Studies in Graz, Austria. Her operatic singing skills enabled her to represent her home state as Miss New Hampshire in The Miss America Pageant, where she won the talent competition and the first B. Wayne Award for the contestant with the most promise in the performing arts.
Trish's journalism awards have included multiple Emmy nominations for her documentary and investigative reporting. Trish was also recognized with a George Polk nomination for her long-form reporting covering the aftermath of Hurricane Katrina with a team from CNBC. While at MarketWatch in San Francisco, Trish was named SF’s Society for Professional Journalists most promising broadcast journalist.
Trish Regan was born and raised in New Hampshire. She now makes her home outside New York City with her husband and three young children.
A successful fund manager and stock picker, Rob Hordon has extensive experience investing across asset classes, sectors, geographies and strategies. With consistent emphasis on ways to preserve and grow assets and manage risk, Rob has offered guidance to thousands of financial advisors and wealth management professionals in the United States and abroad over the course of a multi-decade Wall Street career.
Rob’s professional investment career began in the late 1990s as an associate in the Equity Research department of Credit Suisse First Boston, where he covered wireless telecommunications stocks at the dawn of the mobile phone era. As a recent college graduate, Rob had a front row seat at one of the epicenters of the tech bubble. He witnessed for the first time the stock market’s potential to deliver immense value creation through innovation but also its characteristic tendency towards excess.
Rob went on to obtain his MBA from Columbia Business School, where he focused on security analysis and through his course work learned from some of the top investment practitioners in the country. Upon graduation from Columbia, he took an analyst role in the Risk Arbitrage department of a firm then called Arnhold and S. Bleichroeder Advisers, which would later be renamed First Eagle Investment Management.
For approximately seven years, Rob worked as a member of a small team that ran a hedge fund strategy focused on identifying mispriced long-short opportunities among companies involved in merger and acquisition activity. Just prior to the 2008 financial crisis, he transitioned over to First Eagle’s Global Value team under the auspices of the legendary international investor Jean-Marie Eveillard.
As an analyst on the team, Rob was responsible for initiating and covering several billion dollars of public equity investments across a wide range of industry sectors and countries. This move also reunited him with renowned Columbia Business School economist and author Bruce Greenwald, who had recently joined as Director of Research. As colleagues and mentors, Bruce and Jean-Marie would become the two most formative influences on Rob's investment career.
In 2011, Rob proposed and worked with the team to develop a new multi-asset investment strategy built around the same long-term value-oriented investment philosophy pioneered by Jean-Marie. As co-portfolio manager of the First Eagle Global Income Builder Fund, Rob was directly responsible for over a billion dollars of assets under management with a particular focus on dividend-paying stocks and credit instruments. Rob and his partner later re-created and managed this strategy at a London-based boutique investment firm, J O Hambro Capital Management, beginning in 2017.
In 2023, Rob teamed up with his longtime friend Trish Regan to form 76research, where he is Co-Founder and Chief Investment Strategist. This entrepreneurial venture merges his passion for investing, research and writing with his desire to help others benefit from the long-term wealth creation potential of the stock market.
The son of an economics professor and elementary school teacher, Rob is a proud husband and father of three whose interests include history, philosophy, sailing and world travel. He was born in New York City and grew up in northern New Jersey, where he attended local public schools.
Rob Hordon is a Chartered Financial Analyst. In addition to his MBA from Columbia Business School, he received his Bachelor’s degree in Politics from Princeton University and was awarded a Certificate in Political Theory. His senior thesis, entitled Justice without Truth: Contingency in American Moral Thought, explores how the philosophical tradition of American Pragmatism offers a roadmap out of the moral and political abyss of postmodern relativism.
Guide to Investing in AI
A Selective Approach
Artificial Intelligence, or AI, is arguably the most important topic facing markets today. Inflation, interest rates, the election—these macro issues will, as always, continue to drive market movements. But so much of the stock market now is predicated on AI-related investment and anticipated growth.
For starters, the Information Technology sector alone now constitutes more than 30% of the S&P 500. As tech stocks have soared and their earnings multiples have expanded, in no small part because of AI enthusiasm, they have come to dominate stock market indices. The average weighting of the other 10 sectors is approximately 6%.
Seven stocks in particular—the Magnificent Seven, as they are called—also currently represent more than 30% of the S&P 500 Index. Only three of the seven (Microsoft, Apple and NVIDIA) are technically tech stocks. Amazon and Tesla are classified as Consumer Discretionary, while Meta and Alphabet are considered Communications Services. Yet all of these stocks are viewed as leading AI plays.
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A Selective Approach
Artificial Intelligence, or AI, is arguably the most important topic facing markets today. Inflation, interest rates, the election—these macro issues will, as always, continue to drive market movements. But so much of the stock market now is predicated on AI-related investment and anticipated growth.
For starters, the Information Technology sector alone now constitutes more than 30% of the S&P 500. As tech stocks have soared and their earnings multiples have expanded, in no small part because of AI enthusiasm, they have come to dominate stock market indices. The average weighting of the other 10 sectors is approximately 6%.
Seven stocks in particular—the Magnificent Seven, as they are called—also currently represent more than 30% of the S&P 500 Index. Only three of the seven (Microsoft, Apple and NVIDIA) are technically tech stocks. Amazon and Tesla are classified as Consumer Discretionary, while Meta and Alphabet are considered Communications Services. Yet all of these stocks are viewed as leading AI plays.
By our estimates, as much as half the capitalization of the U.S. stock market is now directly connected to business models that are closely tied to AI. Meanwhile, much of the rest of the market is heavily influenced by AI indirectly. Utility and natural gas stocks, for example, have benefited from anticipated growth in electrical power demand from AI data centers.
With hundreds of billions of dollars getting plowed into AI-related investments, the entire economy is affected. AI has become a macroeconomic force in its own right.
What exactly is AI?
If you’re invested in the stock market—whether through individual securities, mutual funds or ETFs—you very likely have significant direct and indirect AI exposure. To understand your portfolio, you need to understand AI.
Most people might think of AI in the context of websites like OpenAI’s ChatGPT, which can answer questions and write stories—or apps that produce funny psychedelic images that can be created on your phone with a few prompts. While AI is indeed all that stuff, it’s a lot more as well.
In essence, AI is a technology that allows computers to perform cognitive tasks that were previously limited to human beings. These include reasoning, learning, problem-solving, perception, interpreting language and expressing ideas. Very importantly, these cognitive tasks can now be performed at a pace and on a scale that vastly exceeds the capabilities of any human brain.
AI has been developing in the lab for a long time. As far back as 1952, a computer was trained to play checkers. Thanks to a number of recent breakthroughs, AI is finally ready for large scale commercial applications.
On the software side, Learned Language Models (LLMs), such as those utilized by ChatGPT, now provide the logical framework for computers to think like humans. On the hardware side, high-powered Graphic Processing Units (GPUs), such as those sold by NVIDIA, support the vast number of computations that AI programs require.
As a technological innovation, AI truly has no boundaries. It is simply about using advanced computing capabilities, housed within specialized facilities called data centers, to access, manipulate and generate information in all its forms. Use cases for AI are not even limited by the human imagination, as AI itself has the potential over time to program the expansion of its own capabilities.
A friend of 76research recently sent us the video below in which he recorded his experience in a self-driving vehicle on a recent visit to San Francisco and Silicon Valley. Self-driving vehicles, which are deeply reliant on AI technology, are a reality that has already arrived.
In the eyes of many, the possibilities for AI are endless and the profit potential is unimaginably large. Investors are giddy. But many observers think we have seen this movie before.
Is AI a bubble?
Dotcom mania led to a massive investment spree that ultimately crashed and burned—and sent the U.S. economy into recession. While the internet would of course go on to become an incredible force, many early investors badly misjudged how quickly its potential would materialize and where the real profit opportunities would ultimately be found.
We are confident AI technology will have an enormous impact on the economy and will create substantial upside for many investors in a wide range of businesses. The history of computing and internet data usage is one of uninterrupted and persistent growth, as technological advancement inevitably makes everything better, faster and cheaper.
Betting against innovation in AI strikes us an incomprehensibly myopic. At the same time, there are potential excesses in the marketplace now which do present investors with genuine risks.
In our view, the AI investment opportunity is real… but it needs to be approached with caution and selectivity.
The path forward with AI is highly uncertain. The technology is emerging. It can move in a number of different directions. It’s quite possible we are seeing a wave of overinvestment, like we saw in the late 1990s. There will be winners and losers.
It is of course impossible to know, in advance, which stocks will succeed and which stocks will suffer as the AI story unfolds. As always, the task of the investor is to position oneself as best one can.
Where to focus
We highlight four variables that we think are critical for investors to consider as they pursue opportunities and navigate risks around the AI theme.
(1) Valuation: One of the best ways investors can protect themselves is by showing discipline in the price they are willing to pay relative to the financial metrics of a stock. The richer the valuation, the more that growth has already been priced into the stock, and the more damaging it could be if the company’s growth trajectory disappoints. Our preference is to avoid stocks with valuations that require heroic growth assumptions.
(2) Competitive advantage: Industry-wide growth is potentially useless if competitors can easily enter and take market share. Sustainable competitive moats are essential for value creation. A key risk we see in a stock like NVIDIA (NVDA) is that its current premium pricing may erode as competitors catch up, which could decimate the company’s very high (~65%) operating margins.
(3) Optionality: Many of the best stocks of the last decade had the wherewithal to evolve their business models as technology and market conditions changed. Long-term investors should look for evidence of adaptability and innovation. The AI landscape in five years will look nothing like it currently does.
(4) Diversification: Consider a wide range of differentiated approaches to the AI opportunity set, including direct and indirect plays. Given the extent to which AI dominates market indices now, investors should consider complementing their passive exposure with opportunities that are less geared to AI outcomes. In the early 2000s, we experienced a recession after the tech bubble burst. Interest rate sensitive businesses built around secure long-term cash flow streams may actually benefit if AI growth disappoints.
How 76research can help
At 76research, we are focused on understanding the impact of AI on markets in an objective and balanced way. We are impressed with the technological potential but understand that technological change does not automatically translate into financial gain.
We are also sensitive to the possibility that AI has been overhyped and overvalued—but at the same time acutely aware of the risk of missing out on open-ended upside potential.
Sustaining a 30% loss in a stock because it was overvalued, for example, is certainly painful. Failing to realize a 300% gain in the shares of a company that was able to capitalize on a long-term structural opportunity is arguably more painful. Risk cuts both ways.
In a recent issue of our flagship newsletter, the 76report, we addressed the question of a possible AI bubble at length and offered some specific investment ideas. We will of course continue to cover developments in AI going forward for 76report subscribers.
Our Model Portfolio subscribers receive all of our investment ideas and our most in-depth research. A number of these stocks are direct AI plays, while others are indirect AI beneficiaries. We also have many portfolio holdings that offer diversification away from the AI theme.
If there is one thing investors can know with some certainty, AI as a technology is here to stay. As time passes, AI will likely only become an even more important factor in markets and the economy as a whole. As intimidating and complicated the subject might appear, investors should make developing a familiarity with AI one of their highest priorities.