The myth: the only way to play the AI theme is through the megacaps tech stocks like Microsoft and Nvidia.
The reality: No doubt there are a handful of mega-caps that benefit directly from the development and implementation of AI technologies. But from an investment perspective, we believe that the AI opportunity is not confined to a few tech giants. We see the growth of AI fueling a multi-year boom in data center construction and technology spend. It also seems to be accelerating demand for electric power and high-speed connectivity. This can create opportunities across many industries, where a number of well-positioned small and mid-cap companies stand to benefit. Many of these companies offer more attractive valuations, and we think that the market has yet to fully appreciate the improvement in their outlooks.
Even before AI caught the world’s attention, we identified both physical and digital infrastructure as possible fertile areas for investment. The underlying trends that drew our attention remain in place, but AI has turbocharged some aspects of both themes. When we identify a trend or theme, we seek exposure across sectors and industries. The AI theme spans a wide range, including software, semiconductors, construction, industrial technologies, cooling, power generation and beyond. In our portfolio, related holdings extend across Industrials, Energy, Healthcare, Technology, Utility and Consumer companies.
* The securities described above were included as they are current holdings in the AI/Data Center Space. They do not represent all securities in the SMCO strategy, and it should not be assumed that any of the securities will remain in the strategy or will be profitable. A full list of securities for the strategy is available upon request.
We believe that AI may prove to be the most significant technological development in decades, perhaps ever. Its rapid adoption is creating investment opportunities that reach far beyond the direct beneficiaries. As technology leaders commit massive sums to its development and corporations use AI to improve their results, new avenues for profit are opening. By investing in the companies that benefit from this spending, the SMCO portfolio hopes to capture the entire value chain, ranging from semiconductors and data center construction to utilities and industrials.
Hilton Capital Management, LLC (“HCM”) is a Registered Investment Advisor with the US Securities Exchange Commission. The firm only transacts business in states where it is properly notice-filed or is excluded or exempted from registration requirements. Registration as an investment advisor does not constitute an endorsement of the firm by securities regulators nor does it indicate that the advisor has attained a particular level of skill or ability.
This piece is not intended to offer or deliver investment advice in any way. Information regarding the strategy and securities are provided solely to gain an understanding of our investment philosophy, our strategies and to be able to contact us for further information. Recipients should not rely on material in marking any investment decisions. Except where otherwise indicated, the information contained in this presentation is based on holdings and views as they exist as of the date of preparation and not as of the date of distribution or any future date.
Additional Important Disclosures may be found in the HCM Form ADV Part 2A, which can be found at https://adviserinfo.sec.gov/firm/summary/116357.