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Jason Thomas, head of global research at Carlyle Group, said most people are misplaying the artificial intelligence revolution and hype.
Most investors are “loading up on those high AI beta stocks, the most obvious plays related to hardware and infrastructure,” he said in a CNBC interview on Thursday.
He believes that most of the AI revolution’s earnings and growth in productivity are going to be in the industries of drug and therapy development and software development.
“People have not correctly mapped that reality into income statements,” he said, suggesting that in next year’s first quarter, “we might actually start to see the rubber hit the road on some of those ideas.”
He said there have been 25–30% increases in productivity related to software development and that 2024 could bring more.
Although some stocks are in the early stages, especially those in the space of pharmaceuticals and therapies, he also said that it is critically important to get the timing right of when to get into those stocks.
A pickup in capital market activity should be happening once the U.S. moves past the debate of hard versus soft landing, which he believes is “ill-defined” because of a wide range of macroeconomic outcomes that don’t neatly fit those two distinct outcomes.
He said that a more permanent and enduring upward repricing of capital and a longer-term period of higher rates is on the horizon.
IPO deal volumes are increasing, and it is something that should be encouraging, he concluded. “There is a lot of defensiveness in some of these companies in terms of the sheer volume of cash flows they generate and the fact that their growth generally persists through cycles.”
According to S&P Global/Seeking Alpha data, some of the best-rated stocks are (META), (SMCI), (UBER), (CRM), (CAT), (PATH), and (CRWD).
