Chris’ note: If you were following the Daily Cut this week (catch up here and here), you’ll know one of the biggest trends on our radar is the rise of artificial intelligence (AI). And today, for a special edition of the Cut, we’re handing the reins over to our in-house expert on the subject – Jeff Brown.

Jeff has a knack for picking up on technology trends long before other investors. That’s how he picked the No. 1 stock in the S&P 500 in 2016 and 2018. His readers are already up over 150% on the latter so far…

And below, Jeff shows why 2019 will be a breakout year for AI… and where to look if you want to reap the benefits…

“I propose to consider the question, ‘Can machines think?’”

This was the first sentence of a 1950 paper called Computing Machinery and Intelligence, written by Alan Turing.

Turing is a name you might recognize. Born in London in 1912, he was a mathematician, cryptanalyst (one who studies cryptographic security systems), and early computer scientist – among other things. He was a prominent figure during World War II, as he developed a method to crack the cryptographic codes used by the Germans.

The story of Turing and the importance of his work were brought to life in the 1983 novel Alan Turing: The Enigma, as well as the 2014 film The Imitation Game.

Yet, in the years to come, I believe that Turing will be most remembered as the father of artificial intelligence (AI).

A Pivotal Year

One of the key concepts introduced in Turing’s paper is the Turing test. Simply, this test determines whether a “machine” – or as we’d call it today, an AI – is indistinguishable from a human.

In the Turing test, a human interrogates two subjects – one, a human, and the other, an AI – to determine which is human. The conversations taking place in a Turing test are limited to text, just like a conversation in a chat window or text message. This is done so the AI isn’t required to render human-like speech.

So for an AI to pass the Turing test, it doesn’t need to be sentient – it just needs to appear to be.

To date, the Turing test has not yet been passed by any AI. And while this isn’t a near-future event, I’m certain it’ll happen in less than eight years.

My prediction is before the end of 2026.

And that’s not a baseless prediction, either.

Machine learning (ML) and AI software is improving month after month.

2019 will be a pivotal year for semiconductors optimized for running AI, which will only accelerate development.

And as more and more companies adopt and implement AI, there will be exponential growth in application-specific improvement.

Put simply, the more we use the technology, the smarter and more useful it gets.

A Stir in Silicon Valley

Imagine a world where we can use a chat window on our phone, laptop, or desktop to talk to a seemingly “real” person at the other end of the line – but with a near-limitless ability to help answer questions and assist with daily tasks.

I, for one, can’t wait for this. We’re so close.

All of the tasks that consume so much of our time – making an appointment, disputing a health insurance claim, finding a receipt, replying to an email, ordering groceries, looking up a schedule – will all be at our fingertips with the help of a personalized digital assistant: an AI.

And while no AI has yet passed the Turing test, the technology is getting impressively good at performing specific tasks. Companies are compiling large data sets of information and using them to train AIs for their assigned tasks.

I know that this concept might be hard to grasp. So I have a small favor to ask…

Please check out this link to see a short presentation by Google CEO, Sundar Pichai. (Or if you’re reading a printout of this issue, please use a computer or smartphone to look up “Google’s AI Assistant Can Now Make Real Phone Calls.”)

I have to warn you, though… What you’ll hear might startle you.

The AI makes two phone calls: One to schedule a haircut appointment, and the other to make a reservation at a restaurant. It’s so lifelike, the humans receiving the calls had no idea they were talking to an AI.

This caused quite a stir in Silicon Valley. Many believed that an AI should be required to introduce itself as such before continuing a conversation, so as to not “deceive” the human on the other end of the line.

There’s no other way to say it… It’s impressive. It’s so good that it’s not a stretch to imagine widespread use of this technology.

And if you’re wondering how much AI technology is being used (or not), please consider this…

Anyone that’s used a search engine… spoken to an Amazon Echo speaker… called into a call center… or driven a Tesla… has used AI without even realizing it.

It’s that pervasive.

AI is being used right now for self-driving cars, image recognition, speech recognition, facial recognition, high-frequency trading, network optimization, cybersecurity, and on and on.

To say this is a high-growth market is an understatement. In 2017, the market for AI software was a mere $2.75 billion. Yet the forecast for 2025 is an astounding $78 billion. That’s 28 times larger in just eight years.

The market for AI chipsets (semiconductors) is equally impressive. At just $1.6 billion in 2017, the forecasts are for $66 billion by 2025. This is 40x from where we were in 2017, implying even more accelerated growth than AI software during the same timeframe.

Outsized Returns

2019 will be a breakout year for AI, in both consumer and enterprise applications.

A combination of small, powerful semiconductors combined with advanced, standardized AI software algorithms has brought us to this inflection point. And a small number of companies focusing on this technology will reap the rewards in the coming years.

When looking at these companies and the problems they solve, I’m not interested in incremental improvements or doing something just 20% better.

Rather, I like to see small companies helping usher in entirely new technologies and new approaches to solving existing problems – and in some cases, companies that provide life-saving innovations.

It’s these companies that will deliver outsized returns to investors in 2019 and beyond.

The AI trend is just now picking up steam. Wall Street hasn’t yet grasped how important it will be. By reading this, you’re already ahead of the curve.

Regards,

Jeff Brown
Editor, Exponential Tech Investor

P.S. As I mentioned, if you’re reading this, you’re already ahead of the curve. You see, most investors haven’t caught on to what I see as the biggest investment story of 2019…

And I’ve prepared a presentation for you that details my predictions for 2019 and beyond. But, fair warning… these opportunities aren’t for everyone. Most can’t handle the volatility.

But, if you want to potentially pocket a small fortune, read on here.