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Portfolio Manager Insights
Investing in companies harnessing AI to transform their business
Fidelity’s Kyle Weaver favors companies that have already begun to successfully adopt the technology to help boost their growth prospects.
Key Takeaways
- Corporate spending on artificial-intelligence capabilities is no longer limited to promises of future efficiencies and potential growth, according to Fidelity Portfolio Manager Kyle Weaver, who is looking to take advantage of companies that have already successfully incorporated the technology and are reaping the rewards.
- “AI is eventually going to affect everything, and some brick-and-mortar businesses have already realized significant benefits from cleverly deploying the technology into their businesses,” says Weaver, who co-manages Fidelity Advisor® Growth Opportunities Fund with Becky Baker. “You really do see it from some of the slowest-moving, legacy companies in an industry to the more-pure-play digital advertising companies that are able to monetize the growth of their businesses more immediately.”
- In actively managing the diversified domestic equity strategy, Weaver and Baker assess a wide spectrum of companies with varying growth profiles. Their investment approach is anchored by the philosophy that the market can often miss nuances of a company’s business, which they believe could potentially have profound implications for the long-term value of the enterprise.
- As an example, Weaver points to used-car retailer Carvana, a longtime fund holding he established well before AI was the next big thing. His purchase for the fund also preceded what he considers Carvana’s recent renaissance, given it is now viewed as among the fastest-growing and most profitable U.S. used-car retailers.
- The company utilized AI to develop a sales agent called Sebastian, which now handles about half of Carvana’s customer service inquiries, and does so with both a higher net promoter score – a measure of loyalty – and customer satisfaction rating than the average human agent, according to Weaver.
- “Carvana realized that an AI agent could efficiently help customers find the right used car to fit their needs online, and do it very quickly by combing through a vast inventory to identify the perfect match,” he says. ”That helped the company grow its revenue faster, and within a couple of years Carvana went from being unprofitable to one of the industry’s most profitable players.”
- Weaver cites wireless telecommunication services provider T-Mobile as another company that is adopting AI to improve its business, in this case to speed up the process for new customers switching to their network from other wireless carriers.
- “T-Mobile is hoping to use AI to make it much, much easier to digitally switch over your whole family in a process that takes place in a matter of minutes without the help of a human, versus spending a full day in a T-Mobile store,” he says.
- Carvana and T-Mobile were both sizable fund holdings as of March 31. “These two companies illustrate the promise of AI, and show how it can be powerful, even for companies that aren’t traditionally thought of as technology leaders,” he concludes.
FEATURED FUND
Fidelity Advisor Growth Opportunities Fund (FAGCX)
Seeks to provide capital growth.
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