Lori Keith, Director of Research at Parnassus Investments, LLC and Portfolio Manager of the Parnassus Mid Cap strategy
Artificial Intelligence is the powerful wave that will wash through the world’s leading economies in this next decade. These three portfolio managers pick the stocks they think will benefit most.
Lori Keith is the Director of Research at Parnassus Investments, LLC and Portfolio Manager of the Parnassus Mid Cap strategy.
She is responsible for portfolio management of the firm’s Mid Cap strategy and oversees sector research activities for the firm.
Ms. Keith joined Parnassus Investments in 2005 after serving as a Parnassus research intern.
Prior to joining Parnassus, she was Vice President of investment banking at Deloitte & Touche Corporate Finance LLC and a Senior Associate in Robertson Stephens & Company’s investment banking division.
Before that, she worked in the management consulting practice at Ernst & Young.
Ms. Keith received her bachelor’s degree in economics from the University of California, Los Angeles, and her MBA from Harvard Business School.
In her interview with the Wall Street Transcript, Ms. Keith develops her thesis for stock picks that will benefit from the Artificial Intelligence investment wave.
“…Our semiconductor holdings have benefited this year, as there’s been significant investment behind a lot of the AI applications, the large language models and semiconductor chips, and also as that has been heavily invested in by the hyperscale players, the system players, spending significant amounts of money to build out their own capabilities.
One particular type of company that we own within that space that’s directly benefited is the semiconductor equipment companies.
That would include names like KLA Corporation (NASDAQ:KLAC) and Lam Research Corporation (NASDAQ:LRCX).
Both of those provide essentially mission-critical equipment that’s needed to design, develop and manufacture this increasingly complex chip technology.
I’d say KLA has a little bit more of a niche in what’s called advanced inspection process control and yield management.
Specifically, they help the chip manufacturers, also known as fabs, to identify the defects in those highly complex chips before they go into production.
So this technology is extremely mission critical.
They have a very wide moat in the sense that they are one of the few players in the world that has the advanced technology that allows fabs to identify those defects and optimize production for manufacturers.
And they are ultimately benefiting as more and more semiconductor fabrication facilities are built.
As you may have seen, the CHIPS Act is funding new sites for semiconductor manufacturing in places like Arizona, Ohio and upstate New York.
Similarly, Europe has significant fiscal stimulus to fund new chip development activity and diversify that outside of Taiwan, where most is today.
Obviously, that continues to drive significant demand for additional equipment purchases from KLA.
Lam Research, another leading company in the semiconductor equipment space, is more focused on memory chips in terms of their specialty, but is also very much benefiting from robust demand for their specialized equipment, used increasingly for higher bandwidth memory chips to power large language models and AI applications.”
Jonathan Cofsky, CFA, Portfolio Manager on the Global Technology and Innovation Team at Janus Henderson Investors
Jonathan Cofsky, CFA, is a Portfolio Manager on the Global Technology and Innovation Team at Janus Henderson Investors, a position he has held since 2022.
He was previously an assistant portfolio manager.
Additionally, he is a Research Analyst and co-leads the firm’s Technology Sector Research Team.
Prior to joining Janus in 2014, Mr. Cofsky was at Sanford C. Bernstein for eight years, most recently as a vice president on the Institutional Investor IT hardware team.
While there, he also was a senior research associate on teams covering software, semiconductors, data networking equipment, aerospace, and defense.
Mr. Cofsky received a bachelor’s degree in economics from Dartmouth College. His top Artficial Intelligence stock picks also include ASML Holding.
“…The important thing is we’re really looking for innovation and that happens globally.
So, some of the best tech businesses over time, like an ASML (NASDAQ:ASML) or TSMC (NYSE:TSM), are not located in the U.S., and we want the ability for our fund holders to find the best technology companies wherever we can…a lot of the innovation starting with semiconductors, but also in software and internet is within the U.S, but you also have really innovative companies all around the world…
So, companies like ASML, which is in the Netherlands, Lam (NASDAQ:LRCX), KLA (NASDAQ:KLAC), Applied Materials (NASDAQ:AMAT) within the U.S., and there are other companies within Japan and Korea, and then TSMC, which is essentially where all the leading-edge chips that go into GPUs or smartphones are made.
And then on the software side, you have Cadence (NASDAQ:CDNS) and Synopsys (NASDAQ:SNPS), which are the two companies that have EDA — electronic design automation — software that allows you to build increasingly complex chips over time.”
Mr. Cofsky hones in on his top pick:
“I think ASML is a great example.
They essentially have natural monopoly in leading edge lithography.
So that’s how you use light to create chips.
And what they’ve done with things like extreme ultraviolet technology — EUV — machines is really taking the laws of physics to their extreme, and it allows you to make increasingly small chips.
And so that’s one example of a really special company. And no one else has been able to replicate what they do.”
Gus C. Zinn, CFA, Managing Director and Senior Portfolio Manager for the Ivy Science and Technology Team
Gus C. Zinn, CFA, is a Managing Director and Senior Portfolio Manager for Macquarie Asset Management’s Ivy Science and Technology Team, where he is responsible for making day-to-day investment decisions for the team’s strategy.
Mr. Zinn joined Ivy Investments in 1998 (Ivy Investments was acquired by Macquarie in 2021) and has served as Portfolio Manager for Ivy Investments since 2006.
He had served as Assistant Portfolio Manager for funds managed by Ivy Investments since July 2003, in addition to his duties as a Research Analyst.
Mr. Zinn earned a bachelor of science and a master of science in finance from the University of Wisconsin-Madison.
He holds the Chartered Financial Analyst designation.
“The AI deployment right now is really focused on sort of the plumbing and building out that infrastructure.
So obviously, Nvidia (NASDAQ:NVDA) is a large holding and that’s done particularly well.
We think Facebook or Meta (NASDAQ:META) is benefiting significantly through their advertising platform and implementing AI.
So, the AI trend is not just about the buildout.
We have a lot of companies that are benefiting from the buildout.
That’s in the semiconductor space, primarily Nvidia, Broadcom (NASDAQ:AVGO), TSMC (NYSE:TSM), semiconductor capital equipment.
The equipment to make these chips is important; we have large positions in Lam Research (NASDAQ:LRCX) and ASML (NASDAQ:ASML).
Micron (NASDAQ:MU) is another one that has done particularly well lately, as the memory content of these AI servers is significantly higher than a regular server.
We’re really levered to that buildout currently.
And I’d say that’s probably where, if you want to say overweight or whatever, is in that buildout of the plumbing.
There’s another kind of group of companies that are benefiting by implementing AI into their companies.
Meta stands out on that front, like I mentioned, and we’re looking for more of those currently, but we see the AI deployment in three phases.
One is the plumbing.
Two is the putting AI features in existing products like the Copilot for Microsoft (NASDAQ:MSFT) and the Microsoft Office Copilots.
We’ll see how those do over time.
Every company is obviously racing to put AI into their existing products.
And then I think there’s going to be a real exciting stage around new companies that come out that are built from the ground up to take advantage of AI.
Probably, those aren’t really public yet, but we’re expecting to see a huge wave of new companies come to market.
And I’m excited to find those opportunities.”
Artficial Intelligence is the next big stock pickers paradise. Get the complete interviews from these three professional portfolio managers and more, exclusively at the Wall Street Transcript.
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