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Hello, Reader.
Six hundred years ago, Johannes Gutenberg unleashed a revolutionary invention on the Western world: the movable-type printing press.
Although primitive printing presses in Asia pre-dated Gutenberg’s innovation, his version featured refinements that facilitated mass production.
From the moment Gutenberg’s press started squeezing inked metal type onto paper, knowledge and ideas were disseminated on a scale previously unimaginable.
But Gutenberg could never have imagined the future scope and power of his invention. The early “baby steps” of the printing press certainly provided no hint about the innovation it would facilitate over the coming centuries, nor the societal upheaval it would foment.
Centuries later, we now find ourselves on the advent of another “Gutenberg Moment.” One that it will create innovations of superhuman possibility… and rain down destruction on entire industries.
I’m referring, of course, to the new technology we call artificial intelligence – the most exciting and terrifying force that civilization has ever encountered.
As investors, we must do our best to embrace the creative side of this new force, while steering clear of its destructive side. Relative to that critical mission, all other investment considerations matter little.
On the creative side of the ledger, we find two main categories of investment opportunity…
- AI appliers
- AI distributors
We have previously talked about AI appliers here at Smart Money. So today, let’s dive into the world of AI distributors, why they are timely investment opportunities, and how you can get in on the trend.
What IS Distributed AI?
Books by themselves did not promote innovation during the last 600 years… but distributed books did.
The printing press merely pressed ink onto paper, but that printed paper would have never found its way around the world without the publishing industry and legions of supporting industries.
The publishing industry financed and distributed books, creating many fortunes in the process.
Today, the internet plays a major role in AI distribution.
Search engines, like Google, provide instant access to the entire scope of human knowledge, but they do have their limitations. They function mostly like large online encyclopedias and do not provide any additional intelligence of their own.
However, generative AI programs like ChatGPT, Bard, Claude, and Dall-E2 take search engines to the next step. They provide and distribute self-generated “intelligence.”
Applications like these operate inside the big data centers. They do not operate locally. But over time, AI processing – i.e., training and inference – will fan out from the centralized data centers to individual enterprises and homes.
This process – known as “Local AI,” or “on-premises AI” – is about to bring AI distribution to the next level.
The Newest Form of Distributed AI
Local AI refers to any AI processes that an enterprise conducts on its own premises, as opposed to the cloud data centers.
For the last 20 years, most enterprises have been relocating some or all of their processing capabilities from their on-premises PCs and server stacks to offsite data centers – i.e., the cloud.
Companies like Amazon.com Inc. (AMZN), Microsoft Corp. (MSFT), and Alphabet Inc. (GOOG) built massive data center infrastructures that enabled businesses to offload their computing workloads and data storage to remote facilities.
But AI is rapidly reversing that trend. Now, enterprises are migrating huge portions of their processing infrastructure from the cloud back to their own private data centers.
This reverse migration toward on-premises AI is part of the “hybrid cloud” strategy that most companies are implementing. It features both public cloud and on-prem hardware and software solutions. The hybrid approach enables companies to combine the unique capabilities of both.
For example, the public cloud excels at performing tasks that require massive data sets and computational resources. But on-prem systems do a better job of performing customized, secure, real-time applications.
On-prem AI provides three main benefits to enterprises…
- Data security – On-prem AI offers a compelling alternative, by keeping data where it’s generated — within the confines of the user’s environment.
- Speed – Many enterprises prefer to avoid the whims of internet connectivity by operating their IT systems as locally as possible. By processing data locally, these systems eliminate the latency in transmitting data to and from the cloud.
- Customization – Freed from the one-size-fits-all cloud services solutions, enterprises can tailor AI models to their specific needs. This approach allows for greater control and optimization, ensuring that AI solutions are as efficient and effective as possible.
Clearly, on-prem AI is not just a fleeting trend but a significant shift in the AI paradigm.
So, distributed AI is a major investment opportunity that AI will produce. Its wealth-building potential is just as considerable as any other facet of AI.
As the “on-prem rush” gets underway, I recently recommended a company in Fry’s Investment Report that is set to capitalize on this trend.
It is an “old school” personal computer and peripherals company that I consider to be a strong “Buy” at its current price level.
To get all the details on this company – and to access all of my AI-related recommendations – join me at Fry’s Investment Report today.
Regards,
Eric Fry
