Fidelity International: Tech stocks fundamentals are good, maintains a long-term positive view on AI-related industries.

On March 14th, Marty Dropkin, the stock investment director of Fidelity International Asia Pacific, stated that the rise of technology stocks, driven by artificial intelligence concept stocks and the seven tech giants, has continued from 2023 to 2024. The prospects of the industries these companies are in are attractive, with substantial profit growth supporting the continued upward trend in stock prices. The positive momentum of stock prices also strengthens the market's confidence in the good fundamentals of tech stocks. Currently, AI technology applications are widespread, and there are many companies benefiting from various fields, therefore maintaining a long-term positive view on AI-related industries. The leaders and promoters of digitization in manufacturing, industry, and construction industries, based on their current low penetration rates of AI technology, are slowly emerging as attractive opportunities. In addition, software design companies will play an important role in the long-term development of AI. The long-term structural growth factors of technology companies have not changed. Considering the inseparable relationship between technology content and competitiveness, the structural growth potential of technology companies may be further enhanced by mastering AI technology. Companies in any industry also need to upgrade their computer systems to support the latest connectivity features and protect company data. For investors who adhere to investment discipline, there are numerous investment opportunities in tech stocks, the key is to prudently choose companies with sustained and robust growth prospects along with reasonable valuations. Fidelity International stated that the market's demand for graphics processors (GPUs) and AI applications remains strong, with higher demand compared to previous capital expenditure cycles. From current to future substantial market demand for technology applications, all drive the major trend of AI development. Among them, the emerging trend of large language models (LLM) computer calculations is one aspect of AI development. LLM allows computers to process human language and abstract concepts in a more realistic and human-like way, converting these concepts into story creation, automatic programming, and even visually realistic movies. Competition among major network platforms is intense, and to avoid falling behind in the artificial intelligence competition, more and more tech giants are planning to increase investments in AI. This makes other tech companies even more cautious. Additionally, key components of AI, such as AI hardware and semiconductors, are dominated by one or two suppliers, meaning these companies have pricing power. The demand for AI components is outstripping supply, leading to a rush of purchases and further expanding demand. Like any new technological development, it is difficult to see the long-term development of AI in its early stages. Compared to the era of internet development, tech and internet stocks were the hot stocks of the time, with some companies standing out as the winners while many others failed. It is expected that the currently popular AI concept stocks will also develop in a similar trend. Given that AI is still in its continuous development stage, it is difficult to determine the winners at present. In addition to paying attention to popular AI concept stocks, investors can also look at opportunities brought by companies that indirectly benefit from AI development or diversified companies. The degree to which these companies currently benefit from AI development is not always obvious, such as semiconductor factories, semiconductor process integration companies, and memory companies. Further downstream, data center suppliers and even utility companies providing power to data centers may also benefit from the development of AI. Furthermore, the AI-related software and services sector is also worth paying attention to. While consumers can quickly adopt innovative technologies, the speed at which enterprises adopt new technologies is relatively slow. AI software and service providers can assist companies in adopting AI technology in areas such as data, technology integration, and management services. Companies currently seen as losers in the AI development field are also another area that indirectly benefits from AI development. When the market perceives that the prospects of these companies have been influenced by the AI trend, some of them may embrace and adapt to the AI era, such as some customer service companies, business process outsourcers, and music providers.