Rudi’s View: The Megatrend You Simply Cannot Ignore

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In this week’s Weekly Insights:

-The Megatrend You Simply Cannot Ignore -FNArena Talks -Ask FNArena

By Rudi Filapek-Vandyck, Editor

The Megatrend You Simply Cannot Ignore

Two and a halve years have passed since financial markets, and the world at large, woke up to a new technological break-through labeled Generative Artificial Intelligence.

By now, it seems initial investor euphoria has been replaced with general skepsis about true importance and impact duration of the new technology promise, as also shown in share prices dipping lower and not necessarily revisiting the levels that featured at the start of 2025.

Look no further than HMC Capital’s DigiCo Infrastructure REIT ((DGT)) spin-off which made its ASX debut on 13 December last year on a minor discount to the $5 per share IPO pricing, but whose share price is nowadays trading closer to $3 for a concrete example of how sentiment has turned for what seemed the no-brainer momentum trend to jump on over the past two years.

For good measure, not all those share prices locally and internationally have left a gap over the past six months, but many have. And from where I am sitting and observing, it seems many investors would rather buy into Aurizon Holdings ((AZJ)), Iluka Resources ((ILU)), Lendlease ((LLC)) or Monash IVF ((MVF)), and wait for better times to arrive for such market laggards, than grab the opportunity in less ebulliant share prices from obvious AI beneficiaries.

Ironically, today’s wait-and-see approach in Australia contravenes the rush by astute investors globally, including private equity and large pension funds, to grab their slice of what is promised to deliver the next economic and societal in-depth transformation.

So why isn’t there a lot more local enthusiasm for owning shares in Goodman Group ((GMG)) and other AI beneficiaries on the ASX?

Reasons To Be Skeptical

It’s not as if the promise of a different world tomorrow hasn’t arrived previously on Australian shores, and on most occasions the initial hype has quickly turned to dust or the true winners are mostly listed overseas. Think 3D printing and legalised cannabis as examples of the former and smartphones and social media platforms for the latter.

Online shopping and retailing has delivered on its promise of transformative migration, but for investors there are at least as many success stories as disappointments because, underlying, any outcomes are still defined by consumer spending, costs and competition.

Those old enough might still have nightmares about that Great Promise of the late nineties; the Internet.

In between, of course, we also witnessed the emergence and implosion of the Commodities Super Cycle thesis, which got interrupted by the Global Financial Crisis (Iate 2007-March 2009) but then died a silent death in 2012.

GenAI, carried by chip manufacturers and megacap companies in the US and mostly by data centre builders and operators on the ASX, is now in its third year running, which already is a long time in share market terms. Share prices in Goodman and the like more than doubled from the lows in late 2022 into late-2024/at the start of this calendar year.

So with share prices not the cheapest in an expensively priced market and with critics reminding us many hundreds of billions of investments into GenAI have yet to deliver the killer app everybody wants to purchase, maybe common sense dictates the time to chase this trend has now well and truly passed?

As per always, it all depends on how best to assess this new phenomenon, and whatever is the most accurate background and general context.

GenAI Is Developing A Brave New World

According to former Google CEO and Executive Chairman, Eric Schmidt, the development of GenAI is still only embryonic, with many more stages of development on the horizon, and truly transformative outcomes along the way.

In a recent TED Talk interview (link below) released in April, Schmidt argued the advent of AI is, contrary to investor hesitance, still “wildly underhyped” as general understanding is not yet fully appreciative of what is yet to be achieved through this new technology.

The emergence of non-human intelligence, which is what AI essentially embodies, is likely to turn into the most significant development for the last 500 or even 1000 years, he boldly suggests, leaving all other technological revolutions throughout that period in its shadow.

I encourage investors to watch the interview. Technologist turned AI evangelist Schmidt is far from a lonely voice on this matter. In October last year, FNArena interviewed Nilesh Jasani, who runs his own global innovation fund (link included below). The following paragraphs are from Jasani’s latest update for investors:

“Generative AI now orchestrates half the product recommendations on the internet, and a quarter of travel bookings start with a chatbot. Governments, not just hyperscalers, are pouring hundreds of billions of dollars into data-center infrastructure. Money that once paved highways now paves inference lanes.

“As consumers, what we buy, how we buy it, and even why we buy it is being rewritten. A decade from now, 10-20% of global consumption could be in products and services that barely exist today. The world around us is changing at a speed that is difficult to comprehend. It is not our intention here to repeat the refrains sung in every journal and presentation. But there are shifts occurring that are often under-discussed in their magnitude. Every major number hinted at in this section would have been a revolution on its own. Here, they are happening simultaneously and building on each other.

“Not just the Internet is in flux or collectively global consumers, corporates, and governments are spending on a new sector like nothing ever seen, but the capabilities and use cases continue to explode in a way unimaginable even a few months prior. Cars are delivering themselves. The skies are witnessing the first flying taxis. Machines can talk in human languages and process vision perfectly: these feats are so staggering that after Elon Musk, Jensen Huang has also felt the need to state that Robotics could become the biggest industry humanity has ever built.

“One can keep going breathless about the potential in diagnostics, or drug discovery, or in climate management, or in material sciences, or in finance. The opera approaches its crescendo. The world is forging tools so powerful they change the ask of humanity itself.

“We can chase every candlewisp of price volatility, or we can learn to breathe through it. The real risks are not recurring double-digit market corrections every few quarters. The real risk is dedicating one’s attention to managing them and, in the process, straying away from truly historic real-world transformation.”

The message from both Schmidt and Jasani, and from many others, is those investors who keep thinking this boat has sailed, or share prices are too expensive, or there’s risk for another sell-off, are likely to miss out on a once-in-a-lifetime opportunity to be on the right side of history in the making.

Of course, there will be winners and losers, as well as many Grand Successes and Deep Failures. But no matter what type of investor you are, or what horizon your portfolio is set-up for, if GenAI reaches only a quarter of the size predicted by these experts, it will be impossible to escape its impacts on life, societies, economies, businesses, and financial markets.

From this perspective, achieving a better understanding of what is this new technology, and what is its promise, is no longer a choice for active investors.

It’s a necessity.

GenAI Is Electrifying Global Efficiency

As developments accumulate in quick succession, it is increasingly dawning upon AI afficionados any comparison with the smart phone, the Internet, or even personal computers is a sign of not genuinely appreciating the transformation that has already started.

GenAI’s transformative powers are so broad-based across segments, sections and sectors, a more apposite comparison is with the advent of electricity in the early 1900s. By 1920 about 35% of US homes were electrified, giving birth to new industries manufacturing refrigerators, vacuum cleaners, washing machines and radios.

By the end of that decade, that percentage had risen to 68% (90% for the major cities), fueling a consumer spending boom that supported a golden era for equities. Yes, that ultimately ended with an historic disaster at the turn of that decade, but should one worry about such an outcome already?

More than one hundred years later, the development and adoption of GenAI is occurring at much faster, break-neck pace. Its impact on businesses and the economy will be equally broad-based, but profoundly different.

My personal LinkedIn feed suggests people are embracing new AI tools with seldom witnessed gusto. HR departments are receiving perfect job applications. Complaints are drafted in perfect legal lingo. AI is creating high-quality presentation slides, writing standard emails and advising on where to holiday and which recipe or daily exercise seems best.

Investment banking and consultancies are lauding the rapid execution time, without the need for hiring more staff. Fund managers are stunned by the quick execution and the detailed information gathering to support their research.

My prediction is GenAI will be a lot more mentioned throughout the upcoming August reporting season. Critics waiting for the next killer app are missing the point; large corporations like CommBank ((CBA)) and Telstra ((TLS)) awaits the opportunity to become a whole lot leaner and more efficient, which means higher margins, higher profits and (potentially) higher dividends for shareholders.

If investors can be convinced such margin increases are sustainable, this also translates into structurally higher valuations for companies that successfully integrate this new technology throughout their operations. Others will still be forced to make the investment, lest they be sidelined by a successful competitor or new market disruptor.

Nothing in history ever moves in an uninterrupted, straight trajectory, and it is most likely GenAI won’t do it either. This is a positive, as it gives investors time and opportunity to read up and to study, and to get truly acquainted with what tomorrow’s world might look like, starting from today’s likely winners and opportunities.

Time to get crackin’, or to repeat the advice by Eric Schmidt: don’t waste this unique opportunity.

In the same vein, if GenAI truly is a once-in-a-lifetime phenomenon that is changing the world as profoundly as now is believed, there will be an ongoing conga line of opportunities (and misses) for many years to follow.

This still is not an excuse to risk missing out altogether.

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For more reading:

-FNArena’s dedicated section on GenAI: https://fnarena.com/index.php/tag/gen-ai/

-Rudi’s Views: https://fnarena.com/index.php/analysis-data/rudis-views/

Plus also:

-Video TED Talk interview Eric Schmidt: https://www.youtube.com/watch?v=id4YRO7G0wE

-Video Interview with Nilesh Jasani: https://fnarena.com/index.php/fnarena-talks/2024/10/17/interview-with-nilesh-jasani-founder-of-geninnov-global-innovation-fund/

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Paying subscribers have 24/7 access to my curated lists, including All-Weather Performers at: https://fnarena.com/index.php/analysis-data/all-weather-stocks/

FNArena Talks

Interview for Philip Muscatello’s Shares For Beginners about the ins and outs of All-Weathers and the portfolio over the decade past:

https://www.sharesforbeginners.com/blog/fnarena-all-weather

YouTube: https://youtu.be/m33cYbtJsDs?si=MQTAW8YgI2oNjKc4

Spotify: https://open.spotify.com/episode/43A2QQWyfGdHYgixBalJo7?si=dd99905f27554381

Apple Podcasts: https://podcasts.apple.com/au/podcast/all-weather-portfolio-rudi-filapek-vandyck-fnarena/id1451778025?i=1000715348354

Ask FNArena

With fiscal 2025 in the rear view and the August results season only weeks away, FNArena is preparing for an online live event, allowing subscribers and investors to ask questions about what to expect, individual companies, specific strategies, et cetera.

Yours truly will do his best to prepare and answer as many questions as possible. No date has been set as yet, but we’re aiming for the final week of July.

Questions can be send in beforehand via Editor@fnarena.com. More details to follow.

Model Portfolios, Best Buys & Conviction Calls

This section appears from now on every Thursday morning in a separate update on the website. See Rudi’s Views for the archive going back to 2006 (not a typo).

FNArena Subscription

A subscription to FNArena (6 or 12 months) comes with an archive of Special Reports (21 since 2006); examples below.

(This story was written on Monday, 7th July 2025. It was published on the day in the form of an email to paying subscribers, and again on Wednesday as a story on the website).

(Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views are mine and not by association FNArena’s see disclaimer on the website.

In addition, since FNArena runs a Model Portfolio based upon my research on All-Weather Performers it is more than likely that stocks mentioned are included in this Model Portfolio. For all questions about this: contact us via the direct messaging system on the website).

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