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Salesforce, ServiceNow Benefit from Next Phase of the AI Wave

By now, it is clear to most investors that the companies benefiting from the move to artificial intelligence (AI) include more than just a couple of chipmakers. One analogy for the increasing size and breadth of the AI industry is a tsunami: As the wave of corporate investment in AI builds, and the underlying hardware, foundational machine-learning models, and early-stage software applications all continue to improve, a broader set of tech providers has been able to benefit from the associated demand.

For example, Alphabet and Meta are among large cloud-services companies—also known as “hyperscalers”—that are building both the physical infrastructure and large-language models that are needed for AI technologies to be adopted by corporations more broadly. While the servers in their data centers continue to require powerful graphics processing units designed by NVIDIA and manufactured by TSMC, these hyperscalers are also designing their own custom chips, called application-specific integrated circuits (ASICs), which they are developing in partnership with chipmaker Broadcom, boosting that company’s growth outlook as well.

Advances in AI technology are also benefiting enterprise-software providers, as the rise of agentic AI in the fourth quarter brought the long-term promise of computers with human-like problem-solving capabilities into sharper focus. Agentic AI is capable of sophisticated reasoning and can automatically come up with ways to solve complex, multi-step problems—a significant step forward by models such as OpenAI’s o3 and Google’s Gemini 2 as compared to the more limited tasks performed by the previous generation of AI technology. Therefore, agentic AI is likely to be more broadly useful in business software, with companies such as Salesforce and ServiceNow well positioned to offer powerful tools based on this technology. At a recent event in San Francisco, Salesforce Chief Executive Officer Mark Benioff said the company is focused on its agentic-AI platform, Agentforce, adding, “The only thing we’re going to do at Salesforce is Agentforce.”

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In the Robotaxi Race, Look to the Software

If you live in Phoenix, San Francisco, or Los Angeles, chances are you’ve seen driverless taxis picking up or dropping off passengers; maybe you’ve been in one of these “robotaxis” yourself. Waymo, the division of Alphabet that’s been building and operating these autonomous vehicles (AVs), says it is logging about 150,000 rides every week. That is up from 100,000 a week just three months ago.

Alphabet’s Waymo, General Motors’ Cruise, Tesla, Baidu, and others are all in a competition to perfect and dominate the market for AVs. The winner of this new competition won’t be the one that builds the best vehicle, though. The heart of an autonomous vehicle is not the car. It’s the operating system.

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Chipmaking Is Getting More Complex. Daifuku’s Smart Monorails Keep Fabs Running Smoothly

In semiconductor manufacturing, a single speck of dust poses a threat to production. It’s why cleanrooms, the sterile labs where silicon wafers get etched and cut into pieces, and then packaged as finished chips—with thousands of steps in between—contain few humans. To reduce the risk of contamination and defects, materials are largely transported by automated monorail systems that travel along the ceiling.

Source: Daifuku.
While advances in generative artificial intelligence (AI) have put a spotlight on the companies that design and manufacture chips, as well as their data-center customers, providers of cleanroom technology play an increasingly critical role in a world of high-performance computing. Not only is the industry for cleanroom automation characterized by an attractive competitive structure, but new trends and challenges in chipmaking are also improving the growth outlook for this specialized material-handling technology. One player in particular may stand to benefit, and that is Daifuku.

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The Magnificent Seven Skew Market Returns, Style Factors

A small group of US stocks, dubbed the Magnificent Seven, continues to dominate returns in global markets. As seen in the chart above, nearly half of the gains in the MSCI All Country World Index for the first six months of 2024, and all of the gains in the second quarter, came from just these seven stocks.

The phenomenon is not new, although it has become more extreme this year. The Magnificent Seven has accounted for about a third of the index’s return since the end of 2022:

The significant outperformance of the Magnificent Seven has skewed style factors, particularly growth.