Polen Capital: AI is transformative, but..

In this letter to shareholders, the team at Polen Capital shares their thoughts on AI. Despite all the hype, the Polen team has a constructive long-term outlook on AI’s transformative potential but advocates a patient, globally diversified, and active investment approach focused on quality companies, while being mindful of uncertainty and volatility along the way. The firm sees compelling AI opportunities emerging in industries and geographies beyond the current market leaders.

Here are the key points from the letter:

• The Polen team believes AI will have a transformative impact across nearly every industry in the coming years, but it is still too early to accurately determine the long-term winners and losers.

• The next phase of AI opportunities will broaden beyond just the tech sector to innovative companies in other industries and regions like Europe and Asia, where valuations appear more attractive.

• While AI-related stocks have rallied significantly this year, valuations are still much lower than during the dot-com bubble peak in 2000. The largest tech companies currently trade at nearly half the P/E multiples seen in the late 1990s.

• AI is still in the early stages with much uncertainty around issues like governance, ethics, data security and accuracy. Widespread adoption will take time and market leaders will likely change.

• AI’s evolution will likely be bumpy as winners and losers emerge. With the heavy concentration in mega-cap tech, investors should be wary that broad index exposure does not provide true diversification currently.

In addition, Polen has also recently published their investor presentation with their outlook for H2 2024 – see the video here.