The AI Conundrum, Cyber Threats, and Our Digital World: More News on Our Strategies
We've rounded up the key information bits that speak to our Pro Portfolio investments themes.
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As we pored through the headlines this week for information that speaks to our investment themes, we've come up with several conflicting and complementing data points. For example, what's up with artificial intelligence investments and the energy drain caused by AI? How do we connect cybersecurity and digital infrastructure pain points?
Let's tackle these and more with the stories of the week:
Artificial Intelligence
One of the questions in recent weeks about AI is, How much is artificial intelligence being adopted? Comments from several portfolio holdings, including ServiceNow NOW and Microsoft MSFT confirm uptake is happening but here are two industries worth watching that could stand to be disrupted by AI.
“Artificial intelligence was ranked the most exciting emerging technology in the healthcare sector for the fourth year in a row, according to a survey of executives by the Center for Connected Medicine at the University of Pittsburgh Medical Center. Eighty-five percent of respondents agreed that AI should head the list, suggesting leaders think the technology has “significant potential” to improve administration, operations, and clinical care, according to the report.”
“Cybersecurity is complex enough without adding artificial intelligence technology into the mix. But chief information officers, chief information security officers and other IT and security leaders have no choice but to deal with AI as it explodes across the healthcare landscape.” Read more HealthcareITNews
“Airlines have ambitious plans to integrate generative AI into their operations. So far, these implementations have mainly focused on passenger engagement roles. This could soon change, however, as airlines explore how to leverage this technology in technical, back-end functionalities.” Read more at PYMNTS.
Cybersecurity
We go another week of high-profile attacks that keep us bullish on the long-term prospects for cybersecurity spending and the First Trust Nasdaq Cybersecurity ETF CIBR in the portfolio.
“Planned Parenthood has confirmed it suffered a cyberattack affecting its IT systems, forcing it to take parts of its infrastructure offline to contain the damage… The RansomHub ransomware group claimed responsibility yesterday for the attack at Planned Parenthood, threatening to leak 93GB of data allegedly stolen from the organization's systems in six days.” Read more at BleepingComputer
“In an updated SEC filing, Halliburton stopped short of confirming a ransomware extortion scheme but said the cyberattack caused significant disruptions and limitation of access to portions of its IT systems. In addition, the Houston, TX company said the hackers “accessed and exfiltrated information” from its corporate systems.” Read at SecurityWeek
“Cisco’s site for selling company-themed merchandise is currently offline and under maintenance due to hackers compromising it with JavaScript code that steals sensitive customer details provided at checkout... While Cisco’s store is likely used mostly by employees buying the merchandise for themselves or as gifts, the malicious script could potentially allow the attackers to harvest Cisco employee credentials.” Read more at BleepingComputer
Digital Infrastructure
Ramping data center construction and the Internet of Things (IoT) point to demand for chips that power them, keeping us bullish on Nvidia NVDA, Marvell MRVL, and Qualcomm QCOM:
“The Dodge Momentum Index (DMI), a monthly measure of the value of nonresidential building projects going into planning (valued under $500 million), has surged in recent months – predominantly due to data center activity. Since January, the commercial portion of the Index has climbed a whopping 42%. Back in January, data center planning only accounted for 5% of total commercial value. Over the last three months, however, that share has grown to 20-30%. From a project count perspective, only 9 data center projects entered planning back in January, compared to 27 projects in July, with eleven valued between $100 million and $500 million.” Read more at Docge Construction Network
“Despite ongoing challenges, including economic uncertainties, extended lead times in chipset supply, and a gradual economic recovery in China, IoT Analytics projects the market will continue its upward trajectory. The report forecasts that the number of connected IoT devices will grow to 40 billion by 2030, reflecting a measured but steady expansion.” Read more at IOT Business News
Digital Infrastructure, Energy Pain Points
We're getting more confirmation of the looming power shortage that led us to add Eaton ETN shares to the portfolio, as we see more reports of the drain from AI.
“Artificial intelligence could strain the U.S. electric grid, as power demand from data centers is poised to surge in the coming decade just as supply is falling due to the rapid retirement of coal-fired plants. Data centers in the U.S. alone could consume as much electricity as some major industrialized economies produce by 2030, as they proliferate not just in number but also in the scale of their power needs.” Read more at CNBC
Digital Lifestyle
This nugget adds support for our recent decision to add Netflix NFLX to the Bullpen and why we’re bullish on Trade Desk TTD as streaming platforms embrace advertisers.
“Cable TV is continuing to lose viewership in 2024 as many Americans switch over to streaming and other methods to watch TV. According to a new report from Nielsen, cable TV now accounts for just 26.7% of all TV viewership and streaming accounts for 41.4%.” Read more at Cord Cutter News
“US advertisers are expected to spend $28.75 billion on CTV this year, growing 18.8% year-over-year. By 2028, CTV ad spending is forecasted to surpass $42 billion. Elsewhere, CTV ad spending continues to grow, with CTV surpassing traditional desktop/laptop display ad spending in the UK.” Read more at Stack Adapt
Safety & Security
These signals help explain the tear that our shares of Lockheed Martin LMT have been on and why the shares should have a brighter 2025.
“House Armed Services Committee Vice Chairman Rob Wittman is confident Congress will pass a short-term budget extension in the next few weeks and eventually finalize plans for $833 billion in defense spending for fiscal year 2025.” Read more at Yahoo News.
“Japan’s military spending is edging closer to its targeted 2% of gross domestic product (GDP), with big new budget earmarks for drones, missile defense, satellites, cyber defense, and cloud-based command and control systems.” Read more at Asia Times.
“Poland’s budget proposal for 2025 includes record defense spending of 187 billion zlotys ($48.7 billion), officials said Wednesday… Finance Minister Andrzej Domanski said that the defense spending proposal would constitute 4.7% of gross domestic product, compared to 4.2% this year, which already makes Poland a leader in NATO and in the European Union.” Read more at the AP.
“Taiwan’s Cabinet, the Executive Yuan, this week ratified a record defense budget of NT$647 billion, or US$20.2 billion, meant to help defend Taiwan against the prospect of a Chinese invasion.” Read more at DefenseNews.
The Pro Portfolio is long NOW, MSFT, CIBR, NVDA, MRVL, QCOM, ETN, NFLX, TTD, and LMT.
