Editor’s note: “It’s Time to Bet Big on Automation” was previously published in September 2022. It has since been updated to include the most relevant information available.
Amid the past year’s market chaos, I’ve been busy doing one thing: looking for generational investment opportunities.
Why? Because history shows that the best time to invest in emerging technological megatrends is when the markets are crashing. That’s exactly what they did in 2022!
The best time to invest in computer stocks? After the flash crash of 1987. That left promising computer stocks like Microsoft (MSFT) trading for less than 20 cents a share (split adjusted).
The best time to invest in internet stocks? After the dot-com crash of 2000. That left promising internet stocks like Amazon (AMZN) trading for just about 30 cents (split adjusted).
Smartphone stocks? After the 2008 financial crisis. That left smartphone stocks like Apple (AAPL) trading for less than $3 (split adjusted).
Electric vehicle stocks? After 2020’s COVID crash. That left EV stocks like Tesla (TSLA) trading for just about $25 (split adjusted).
You get the point. The pattern’s pretty clear. Every time the market crashes, emerging technology stocks are left to trade at massive discounts. Investors who buy those fire-sale stocks end up making fortunes over the next three, five, and 10-plus years.
So… what emerging tech stocks are some of the best buys following the 2022 market rout? I’d like to make the case for automation stocks.
The Urgent Need for Automation
I truly believe automation technologies will represent one of the greatest technological paradigm shifts of our lifetimes. Further, I believe that shift will mostly occur in the 2020s.
Over the next decade, we’ll go from a human-driven to a robot-driven world. And as a result, our global economy will be forever changed.
This megatrend – like many before it – will be driven by a convergence of the world’s need for automation tech and engineers’ ability to build very capable versions of it.
Let’s talk about the “need” part first.
In short, the world needs to fix inflation. And ubiquitous adoption of automation technologies is the only way to suppress inflation permanently.
There are two parts to the inflation problem. The demand for goods and services is too high, and the supply for them is too low.
The Fed can solve the first part. Hike interest rates. Choke off consumer spending. Suppress economic demand – pretty easy.
But rate hikes don’t address the supply side of the inflation problem. The only way to fix that is if companies figure out a way to make more products and services. But to make more products and services in a human-driven world, you need more labor. That means companies need to hire more workers, which means more wages, consumer income, spending, and economic demand.
In other words, the present “solution” to fixing the supply side of the inflation equation will exacerbate the demand dilemma. And therefore, it won’t permanently resolve the inflation situation.
We need a different solution – and not an inflationary human-driven solution. We need a disinflationary automation-driven solution.
Automation Counters Inflation
Let’s play out the same scenario as above but in an automation-driven world.
A company needs to make more product. It deploys a series of automation technologies – both software and hardware – to make it.
Those technologies have a big upfront installation fee but very low recurring costs after that. Net impact to annual operating expenses? Tiny.
Yet, those technologies don’t sleep, clock out, or take vacations. They’re always working to make more product. Net impact to output? Huge boost.
The overall result – the company can make a lot more product at a fractionally higher marginal cost. Supply goes up without producing more economic demand.
Automation is the panacea to our current inflation problem.
Companies are starting to realize this. That’s why they’re starting to turn toward automation technologies. And so emerges the multi-trillion-dollar Automation Economy.
These Technologies Have Arrived
Automation technologies have progressed rapidly over the past few years. They’re now at a point where they’re capable of creating meaningful real-world value – and at the perfect time, too!
For example, Walmart (WMT) is in the process of automating all its warehouses with an end-to-end robotics system. It will unpack, sort, store, and repack inbound and outbound parcels with a combination of robot arms and mini autonomous vehicles.
That’s after Amazon has already automated all its warehouses with its own robotics system. Plus, the company also acquired both iRobot (robotic vacuum maker) and Cloostermans (warehouse robotics firm). That was just months after unveiling its first-ever home robot.
Clearly, Amazon is making a big push toward household robotics – the deployment of robots to automate household chores like lawnmowing, pool cleaning, and more.
In the restaurant world, fast-casual chains like Chipotle (CMG), Wing Zone, and White Castle are using robots to make food. Other chains like Chili’s are using robots to wait tables.
And the automation takeover has arrived in retail, too. Robots and autonomous vehicles are being used to stock shelves, clean store aisles, and deliver food orders for chains like Domino’s Pizza (DPZ).
The Automation Revolution has touched down in the media and entertainment world as well. Have you seen those ads that say, “this ad was probably written by a robot”? What about those drawings that were created by Dall-E, the AI that generates pictures from queries? How about Jasper, the AI writing machine? And we know you’ve heard of ChatGPT.
That’s just the tip of the iceberg. Experts predict that by 2026, 90% of all online content will be produced by AI.
Alas, I rest my case. The world doesn’t just need automation technologies today. It has automation technologies it can readily deploy, too. That’s a potent combination.
The Final Word
Every market crash is an opportunity to buy the “next big thing” for dirt-cheap while everyone else is worrying about short-term problems that will pass. (Indeed, they always do).
In the 1980s, that “next big thing” was the computer. In the 1990s, it was the internet. Then in the 2000s, it was the smartphone. And in the 2010s, it was electric vehicles.
Now, in the 2020s, it’s automation.
The time to bet big on automation stocks is today. They’re dirt-cheap… trading for just a few bucks. Take advantage before they absolutely soar over the next decade, and robots and software eat the world.
Find out one of my favorite AI stocks to buy now with $500. It’s a cloud-based AI lending platform that’s attempting to revolutionize the entire world of credit by replacing the manual, human-driven process with an automated, AI-driven one.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.