Thematics_ Uncovering Alpha in AI's Rate of Change

Summary of Key Points from the Conference Call Industry Overview - The focus is on the AI industry, particularly the evolution and adoption of AI technologies since the launch of ChatGPT over two years ago, indicating that the industry is still in its early stages of diffusion [1][2][4]. Core Insights and Arguments 1. Rate of Change in AI: The rate of change in AI capabilities continues to surprise analysts, with significant adjustments made to the AI exposure and materiality of over 585 stocks, representing a market cap of $13 trillion [2][27]. 2. Outperformance of AI Stocks: Stocks that have seen increased AI exposure and materiality have outperformed the market, with a projected 29% upside to price targets for overweight-rated stocks identified in the latest survey [3][27]. 3. Agentic AI: The year 2025 is anticipated to be pivotal for Agentic AI, where software will transition from reactive to proactive functionalities, leading to enhanced productivity and broader enterprise adoption [4][52]. 4. Sector Performance: The semiconductor sector's outperformance is expected to give way to software, with a notable shift in market dynamics as AI technologies become more integrated into enterprise solutions [4][53]. Important but Overlooked Content 1. Financial Sector's AI Adoption: The financial sector has seen the highest net increase in AI materiality, with 17% of financial stocks now considering AI as significantly important to their investment thesis [27][69]. 2. Pricing Power: Companies classified as Adopters with high pricing power have outperformed those with low pricing power by approximately 30% since the launch of ChatGPT, indicating the importance of pricing strategy in leveraging AI benefits [65][66]. 3. Global AI Adoption Trends: The U.S. leads in generative AI adoption, but there is potential for other regions, particularly Europe and Asia, to catch up, especially among moderate adopters [40][41][42]. 4. Future Projections: Gartner predicts that by 2028, 33% of enterprise software applications will incorporate agentic AI, highlighting a significant shift in how software interacts with users and processes tasks [52]. Conclusion - The AI industry is poised for substantial growth and transformation, particularly with the rise of Agentic AI. Investors are encouraged to focus on stocks with high materiality and pricing power, as these are likely to yield significant returns in the evolving landscape of AI technologies [63][65][86].