The best way to capitalize on generative artificial intelligence is to construct a portfolio that is exposed to companies that are experiencing the most demand to support the technology, according to Fidelity Portfolio Manager Adam Benjamin, explaining his current focus on semiconductor makers and hardware providers.
“We are currently in the ‘picks and shovels’ phase of AI development, so the beneficiaries have been companies that are responsible for putting infrastructure in place for AI clusters—specifically, chipmakers and makers of hardware,” says Benjamin, who manages Fidelity® Select Technology Portfolio (FSPTX).
In helming the sector-based, equity-focused strategy since 2020, Benjamin focuses on themes that impact the largest end markets, while trying to determine how certain companies that are technology disruptors can influence incumbents.
AI squarely fits that investment terrain, says Benjamin, especially chipmaker Nvidia (NVDIA), the fund’s top holding and overweight as of August 31, representing about 20% of assets. With Nvidia dominating the market for advanced graphics chips that are the lifeblood of new generative AI systems, Benjamin considers it the purest way to gain exposure to the technology, with a compelling risk/reward, factoring in upside potential versus Wall Street’s earnings estimates and relative valuation.
He is similarly optimistic about Apple (AAPL), especially after the company unveiled Apple Intelligence in June, marking its closely watched entry into the race to enhance its devices by capitalizing on generative AI.
“Apple boasts an extensive installed base, driven by its line of smartphones, PCs and other products that seem suitable for integrating generative AI capabilities and creating strong potential for monetization from generative AI, without the capex burden of the hyperscalers (large cloud service providers), such as Microsoft, Amazon.com and Google,” he says. Benjamin notes that he meaningfully added to the fund’s Apple position in 2024, making it about 20% of assets by the end of August.
In the application software group, ServiceNow (NOW) is another AI-driven top holding and notable overweight. The company offers an intelligent, cloud-based platform and tools for automating, managing and optimizing enterprise processes, and is a rare software beneficiary from generative AI, according to Benjamin.
He explains that, in general, the software industry is facing potential disruption from generative AI, combined with tightening and shifting enterprise budgets, making it even more challenging to discern the true winners and losers.
“Investing in the next phase of AI technology is where it gets a bit muddy, because the challenges of generative AI are so complicated that it will likely take much longer to see the fundamental benefit and widespread adoption that many expect,” says Benjamin.
Meanwhile, he says he’s content to favor AI pure plays while leveraging Fidelity’s differentiated research capabilities to determine which companies are likely to become the next major beneficiaries in this fast-growing area of the tech sector.
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Adam Benjamin is a research analyst and portfolio manager in the Equity division at Fidelity Investments.
Mr. Benjamin manages the Fidelity Advisor Technology Fund, Fidelity VIP Technology Portfolio, Fidelity Select Semiconductors Portfolio, Fidelity Select Technology Fund, Fidelity Advisor Semiconductors Fund and the information technology sleeves of the Fidelity Institutional Asset Management (FIAM) Large Cap Core and Global Core sector strategies. He also covers the large cap semiconductors industry.
Prior to assuming his current roles, Mr. Benjamin was a research analyst responsible for the coverage of the semiconductor, semiconductor capital equipment, and solar end markets. Most recently he served as global technology sector leader within FIAM.
Before joining Fidelity in 2011, Mr. Benjamin served as managing director and head of semiconductor equity research at Jefferies & Company, Inc. Previously, he held various roles at SG Cowen, including senior research associate focused on the semiconductor space and vice president in the Technology M&A group. Mr. Benjamin was also an associate in the Corporate Law department of Sullivan & Worcester. He has been following the technology sector for over 18 years.
Mr. Benjamin earned his bachelor of arts degree from Cornell University and his juris doctor degree, cum laude, from Suffolk University Law School.