Wall Street pros say chipmakers remain the best way to play the race for the top artificial intelligence agent, even as Meta Platforms Inc.'s Muse seems to have seized the baton. "Leadership is almost like a game of hot potato," said Paisley Nardini, who helps oversee $3.8 billion as head of investment strategy at Tema ETFs, which owns Meta shares. "I'm already hearing people joke about how we'll forget about Muse for something else in a couple weeks."
AI agents handle multi-step tasks like making reservations or managing finances. Their popularity has created waves in the market as investors weigh which products are likely to emerge as favorites. Amid those questions, however, what's become clear is that these new agents require more computing power than the previous generation of AI tools, largely chatbots. That means there should be continuing demand for the shares of chipmakers and other areas of the AI infrastructure landscape.
"Rather than trying to play which company will wind up with the best agent, we want to own the foundation for agents overall," said Rick Lear, chief investment officer at Lear Investment Management, whose portfolio focuses on names it expects to benefit from the rise of agents, such as Nvidia Corp., Micron Technology Inc. and power company Williams Cos Inc. "Tech leadership keeps going back and forth, but if agents take off overall, we will need a lot more chips, more memory, more power, more infrastructure," he said. "That will be true universally, regardless of whether we go from Meta being the best to stinking again."
AI infrastructure stocks have driven the market this year. Of the top 10 gainers in the S&P 500 Index, nine have exposure to the theme. Chipmakers have been particularly strong, with the Philadelphia Stock Exchange Semiconductor Index jumping 84%, fueled by AI plays like Micron, Marvell Technology Inc., Intel Corp. and Advanced Micro Devices Inc. Meta debuted its Muse personal AI assistant last month and quickly garnered huge download numbers. That contributed to a scorching September for Facebook's parent, with the stock's 27% gain representing its best month in nearly four years. Open AI followed with its own new product, Dots, joining Alphabet Inc.'s Gemini Spark and Space XAI's Grok Bot in the AI agent market. Muse's popularity shows how quickly AI sentiment can change, with momentum often shifting to the latest or buzziest product. While Meta is riding high now, it struggled in the first half of the year due to the perception that it was spending tens of billions on AI with little to show for it. Meanwhile, Alphabet has gone from being considered the AI leader to coming under scrutiny. That kind of whipsaw is why so many investors see AI infrastructure stocks as more reliable wagers than the companies in the agent race. "If you're trying to bet on whether Meta, Alphabet, Apple or someone else will be the biggest winner of AI agents, right now that looks like a coin flip," Tema ETFs' Nardini said. "Infrastructure is a more straightforward way to reap the benefits, because demand for agents will drive demand for these products over a long-term time horizon."
The sector is expected to post net income growth of 63% in 2027 on a 54% leap in revenue, according to Bloomberg Intelligence. At the end of July, the projection was for an increase of less than...
Source: Bloomberg Markets · Summarized by HeadlinesBriefing