One Adopts AI, One Survives It – 2 AI Plays to Buy Now

Hello, Reader.

Meta Platforms Inc. (META)Just froze hiring for its new artificial intelligence division, sending shock waves through the AI space.

This halt comes after the tech giant's costly hiring spree this summer, where it recruited prized researchers like Alexandr Wang, former CEO of Scale AI... Nat Friedman, former CEO of GitHub... and Ruoming Pang, former head of AI models forApple Inc. (AAPL).

These big names are part of Meta's Superintelligence Labs, its new AI division. But now it seems that the poaching has stalled.

The company says the pause is due to "basic organizational planning," which follows its Tuesday announcement that it is splitting up the Superintelligence Labs into multiple departments.

This hiring freeze and double reorganization comes amid Meta's, frankly, out-of-control AI spending this year. (Some of those aforementioned researchers' signing bonuses reached $100 million or more.)

As I mentioned in yesterday'sSmart Money, we need to view every new investment opportunity through the lens of artificial intelligence. And one way we do that is by focusing only on companies that apply AI in cost-effective and/or market-leading ways.

Meta fails in that regard, quite spectacularly.

But the big spender is still a major AI player and a well-known name. Therefore, it is most likely in many investors' portfolios.

While many investors will try to capitalize on AI by rushing toward the hottest, hyped-up AI stocks - like Meta - it's easy to get burned.

Instead, I recommend looking for the best-of-breed companies that fall into four distinct AI investment categories. I shared the first two groups yesterday.

Today, I'll share the other two distinct AI investment categories… along with a company that I recommend for each.

Let's dive in...

Category 3: Investing in AI Survivors

AI is not a death sentence foreverycompany on the planet. Some companies provide a product or service that is resilient to AI disruption, at least for now. These “future-proof” enterprises produce goods and services that AI cannot replicate or replace.

Examples would include companies that operate in major industries such as...

• Agriculture
• Energy in its various forms
• Mining
• Hospitality and travel

Some companies also have a future-proof quality because they provide "affordable luxuries" such as farm-to-table food products, artisanal home goods, premium coffees, or high-end spirits.

Although silicon chips, supercomputers, and data center clusters will bring the AI age to life, they will not define it. The "premiumization" of inherently human elements might.

Dutch Bros Inc. (BROS)belongs firmly in the AI Survivor category.

While Dutch Bros may leverage AI tools for operational efficiency, itsproduct– coffee served with human connection – is fundamentally AI-proof.

Dutch Bros is a rapidly growing drive-thru coffee chain that's building a fiercely loyal fanbase across America.

The Oregon-based company isn't just selling coffee and energy drinks - it's selling human connections. Dutch Bros baristas are trained to deliver a friendly, personal, upbeat "vibe" that forms an emotional bond with customers, especially among millennials and Gen Z.

You can't automate that kind of empathetic, unscripted interaction.

No AI chatbot or robotic arm can replicate the charm of a barista remembering your drink, joking with you at the window, or brightening your day with a quick conversation. The coffee is the medium, but the experience is the product, which is why customers become so loyal to the brand.

That said, AI will increasingly support the company's operational processes such as inventory management, staffing, site selection, and mobile app performance. However, these improvements are not visible to the customer and do not change the fundamental value proposition.

Just as coffee survived the internet age intact, it will survive the AI age - possibly even thrive as humans seek real-world connections in a digital-first world.

Category 4: Investing in Stealth AI

Stealth AI companies - you can also call them "AI Appliers" - are quietly adopting AI technologies to boost efficiency, productivity, and profitability. These companies may not scream "technology," but they could profit enormously as they deploy AI technologies throughout their operations.

Many of the companies in this category may appear old-school or even "boring," but their ability to integrate AI into existing business models could help them significantly increase revenues and profit margins.

Take retail, for example.

Like I said a little bit further up, Dutch Bros qualifies here.

But I also have my eye on theAmazon of South Korea.

It is revolutionizing e-commerce in the country. Its core business delivers 99% of its orders within 24 hours.

This company is developing and testing ways to enhance its businesses with AI and other machine learning (ML) technologies. Some AI-related focus areas include...

• Personalized product search and recommendations
• Fulfillment center automation and optimization
• Workflow management
• Cloud computing and AI infrastructure

It is also developing technologies to enhance various aspects of its e-commerce and logistics operations (and patenting them in order to lock in their value). The number of this company's global patents has tripled to over 2,100 in the last four years.

This year,Fast Companynamed the company one of the World's Most Innovative Companies for harnessing "the power of artificial intelligence (AI), robotics and automation to create the future of global commerce.”

You can learn all the details about this stealth AI play - ticker symbol and all - here.

Regards,

Eric Fry

Editor,Smart Money

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