Nick Griffin is a believer in the artificial intelligence revolution.
The chief investment officer of Melbourne-based fund managers Munro Partners was an early investor in chipmaker Nvidia. He says we’re in the middle of the sort of platform shift that comes along very rarely, and threatens to change everything.
In Griffin’s mind, speculation about whether AI will live up to its enormous promise is now redundant. Demand for tokens – the fuel on which the AI boom runs – is already so great that investors can be comfortable they’re no longer guessing.
This week’s March quarter profit results from Microsoft, Meta Platforms, Amazon and Google owner Alphabet, and the best month on Wall Street since the pandemic, suggest Griffin’s zeal isn’t misplaced.
But he’s not worried if you don’t share his AI optimism. He’s positive you can still make money from a spending boom he compares to the commodities supercycle China set off in the 2010s or the gold boom of the 1850s.
“We’re effectively going through an industrial revolution here, or an intelligence revolution,” Griffin said at an event held this week by Future Generation, the philanthropy-focused investment firm that runs three strategies – the Future Generation Australia and Future Generation Global listed investment companies, and the Future Generation Women – and donates 1 per cent of their asset bases to charity each year.
“That revolution is around the buildout of data centres. A lot of people think this is overspending. But we would argue we’re just at the start.
“Even if you don’t believe anything I’m saying about AI, you can just invest in the companies that are going to collect the money from the data centre buildout.”
Griffin offers two stock picks in that vein. He says Taiwanese chipmaker TSMC, which produces the most advanced semiconductors for chip designers such as Nvidia and Broadcom, sits at the heart of the AI supply chain.
It’s a classic “picks and shovels” investment for a data centre investment cycle he expects will run for the next decade.
His second pick is Chinese battery giant CATL, which Griffin says can benefit from the boom in energy storage and electric vehicles, where demand growth should accelerate because of the energy shock caused by the war in Iran.
“No one’s going back to petrol vehicles from here,” says Griffin. “I’m sorry. They’ve lost trust in oil.”
CATL is guiding towards volume growth of between 20 per cent and 30 per cent over the next five years.
As investors try to sort through the oil shock and the AI boom, we’ve collected 10 more stock tips from the Future Generation events held over the past two weeks.
Vihari Ross, Antipodes Partners
As the world watches Iran nervously, Ross is looking towards oil sector services giant SLB, formerly Schlumberger. She says it is perfectly played to benefit from a pick-up in energy investment after a decade of decline.
Ross says the company trades on a multiple of 17 times earnings, a discount to history, and returns about 10 per cent of its market capitalisation each year through buybacks and dividends. That means investors will be well compensated as they wait for that upgrade cycle to play out.
Ross also likes Walt Disney Co. Antipodes is betting on the firm’s strong growth in streaming income (up 72 per cent in the March quarter) and the resilience of its AI-proof theme parks business to help close a valuation gap that has plagued the stock.
Ross says a $US7 billion ($9.7 billion) share buyback for 2026 helps underscore management’s view that better times are ahead.
Ben Griffiths, Eley Griffiths Group
Explosives maker Orica has fallen about 20 per cent since late February, and Griffiths sees an opportunity. He says its growing exposure to sectors such as gold, copper and coal will help underpin annualised earnings growth of 11 per cent over the next three years.
He also likes Technology One, a victim of the savage sell-off in software-as-a-service (SaaS) stocks over the past six months.
But Griffiths says the company’s argentic AI solution, called Plus, can actually deliver stronger earnings growth than the 18 per cent a year that the market expects over the next three years.
Doug Tynan, GCQ Funds
While the investment world froths over new-school AI plays, Tynan is looking towards more established tech names.
He says Uber “has successfully completed its transformation from an unprofitable disruptor into a high-quality, cash-generating machine”. Revenue has grown at 20 per cent a year over the past seven years, but Tynan says Uber still accounts for just 2 per cent of trips in the United States.
He also says AI-powered autonomous vehicles could be a tailwind for the company, simply because driverless car firms need access to Uber’s 200 million active users.
Tynan thinks Uber’s stock can double, but he hopes the share price of Japanese cloud accounting software group Money Forward can treble over the next five years.
He says the company shares many similarities with Xero, including the high barriers to switching that the Australasian company enjoys. But more importantly, Money Forward is now past a heavy investment cycle, which means its margins can jump higher.
The firm is another victim of the SaaSpocalypse, but Tynan thinks the market is ignoring its long growth runway.
Julia Weng, Paradice Investment Management
The recent jump in lithium prices has been great news for Australia’s listed miners, but Weng is confident there’s more to come.
“We saw the lithium cycle a few years ago, and we think we’re in the early innings of another one,” she says.
Electric vehicles are part of the story. But she’s even more excited about the demand from energy storage systems, which has been rising at more than 50 per cent a year in recent years, and now accounts for 30 per cent of global lithium demand.
Paradice’s pick in the sector is PLS, which Weng says has the right cost base and balance sheet to ride the lithium sector’s comeback.
She also likes Macquarie Group, which will deliver its first-half earnings next Friday. Weng thinks they could be better than expected, given that turmoil in the energy sector historically has led to more activity within Macquarie’s giant commodities division.
Weng also thinks Macquarie’s asset recycling program, particularly in data centres and energy infrastructure, could drive performance fees beyond current market expectations.
Geoff Wilson, Wilson Asset Management & Future Generation
Like Griffin, Wilson likes the “picks and shovels” part of the AI boom, and names Goodman Group one of his top picks.
“The biggest constraints on data centre companies are power, land and funding,” he says. “Goodman has all three.”
Although Wilson says founder Greg Goodman has assembled an experienced data centre team and portfolio of top locations, the company’s industrial business still accounts for two-thirds of the current share price.
“This implies you are paying cents on the dollar for their data centre business,” he says.
Stockland chief executive Tarun Gupta might be warning of a “major, major slowdown” in the Australian economy. But Wilson is betting the interest rate outlook isn’t as bad as it might seem, and when rates don’t rise as much as expected, Stockland will emerge as a winner.
It doesn’t need a red-hot macro environment to capitalise on demand for affordable housing, and Stockland, too, is playing around in the data centre game. The stock is also 35 per cent off recent highs, suggesting a property downgrade is priced in.
Finally, Wilson likes property classifieds giant REA Group, which has been beaten up during the SaaS selloff.
“We believe this is one of the best-placed ASX stocks to navigate the disruption,” says Wilson. “They are a market leader, with a large existing envelope of investment spend that can be redirected to AI and also benefit from AI efficiencies.”
REA stock is up 8 per cent in the past month, but Wilson still thinks it’s a high-quality business, with double-digit earnings growth that is still trading at a discount.
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