Big tech isn’t dead, according to portfolio manager Trent Masters, who identified his favorite stocks to play artificial intelligence and more. “[It was a] wild reporting season. While there were minimal changes to earnings estimates in aggregate, this was better than feared heading in,” said Masters, global portfolio manager at Sydney-based Alphinity. “One of the main stories was big tech; they weren’t dead, but only resting,” he told CNBC’s “Street Signs Asia” last week. There are two main themes in tech worth considering right now, Masters said: cloud and artificial intelligence. On the latter, he said momentum was clearly starting to build, as recent earnings transcripts were peppered with AI references. “The inflection is real,” he said of AI. “Now I’m normally very skeptical of claims of the next transformative tech breakthrough, but the AI momentum is no Segway: it is real … This one really has some legs in terms of playing it.” ‘Really exciting area’ Artificial intelligence took the world by storm earlier this year as ChatGPT made headlines , causing analysts and fund managers alike to turn bullish on companies benefiting from the trend – from Big Tech to chipmakers. Masters said that one “really exciting area” yet to be explored is the creation of verticals that sit on top of large language models like ChatGBT. Large language models, or LLMs, are programmed to understand human language and generate responses based on large sets of data. “Whether that’s around legal or finance or travel, you can see some really powerful tools being developed. And I really do think that’s where we could see the next Microsoft or Google or Amazon really start to emerge,” he said. Microsoft Masters said Microsoft is “the first port of call” for investors who want to delve into AI. The tech giant plays into the theme across a number of different areas, he said, including its cloud business, and an extension of AI features into its Office 365 software. “You can see the uplift in terms of output when you start to push those AI capabilities through that broad Microsoft product set and across what is around 500 million commercial customers,” Masters said. “The upward inflection in terms of earnings can be quite remarkable.” Chip stocks Semiconductor firms will also gain from the infrastructure “that sits behind” AI, he said, naming Nvidia and AMD as top picks. However, he warned that investors will have to be selective in making sure the “juice hasn’t been factored into” the share prices. Masters also named Onsemi as another semiconductor pick, in notes sent to CNBC. “Despite concerns for some peers in auto semis, ON continue to deliver. Great result with exceptional execution around the development of their silicon carbide business. Auto demand continues to hang in as the broader EV adoption trends remain on track,” he said. Fortinet Another favorite stock of the portfolio manager’s is U.S. cybersecurity firm Fortinet , which he sees as having “good execution.” Spending in cybersecurity remains resilient, he added, and Fortinet is well positioned in the growth areas of operational technology security, and the convergence of security and networking. “Wrap this together and you have core secular drivers + share gains that should drive growth of > 20% in the coming years, and with free cash flow growth even higher,” Masters said in notes to CNBC. — CNBC’s Ryan Browne contributed to this report.
