You might’ve heard of the famous old western, The Magnificent Seven”. A star-studded cast including Steve McQueen, Yul Brynner, and Charles Bronson, it was a classic of the genre: a suspenseful plot, good guys fighting bad guys, great landscape, and a happy ending. As a boy in the 1960s, I thought there was little better.

Well, the Magnificent Seven ride again and, chances are, you’re invested in them. This time, they don’t carry colt revolvers or carbines – they bring a different world and a whole lot of dollars.

The 2024 version of the Magnificent Seven is a group of companies: Microsoft, Amazon, Meta, Nvidia, Alphabet (Google), Tesla, Apple. The shares of these seven companies have performed magnificently for the last year or so. In fact, many have done very well for a long time, but more recently they really have been magnificent.

One of the common threads of nearly all of these companies is their involvement in, and exposure to, Artificial Intelligence (AI). AI is on everyone’s lips - and so it should be: AI will transform the world and the way we do things. Anybody who has used ChatGPT or seen a driverless car in action will know how good they are. Yet, make no mistake, it’s very early days – we’re still in the “play” phase - with much more powerful and serious stuff to come.

AI will make some companies rich, turning them into investments par excellence. In fact, we have already seen a good bit of this as some tech companies (including the Magnificent Seven) have produced stunning returns in the last few years (for example, the share price of Nvidia has gone from US$45 just five years ago to US$660 at the time of writing).

Of course, the scramble to find others to perform in similar ways is well and truly on. Most of the Magnificent Seven have done well over the same period and a good deal of the performance has been attributed to the benefit that these companies will enjoy from AI.

Before you go looking in the haystack for the proverbial needle (i.e. that one winning investment) you should remember that the singular needle is very hard to find. Different companies will benefit from AI in different ways and there will probably be multiple winners. To hunt through the haystack with the idea that you need to find just one winner is probably doomed to fail.

Even now, at this very early stage of this explosive, transformational technology, there are multiple winners. Pick through a few of the Magnificent Sven and see how they are making money from AI in different ways:

Microsoft is widely regarded as the AI leader at the moment. It has a heavy investment in ChatGPT and the market gets fairly excited by this. However, Microsoft also has a good stake in cloud computing and data storage, both of which stand to benefit as AI continues to grow and expand.

Nvidia designs sophisticated chips for computers. These chips are essential for AI computing and Nvidia currently enjoys market dominance given it’s mostly well ahead of other chipmakers. Although it does have competitors, the way that the market has bid up the share price speaks clearly of its front-running position.

Amazon is usually considered an on-line retailer, but it has a very large (and growing) business in cloud computing. This benefits from the additional computer power required for AI. Amazon is also involved in machine learning and even its retail business should benefit from AI.

The remaining members of the Magnificent Seven will also gain from AI: Google and Meta have AI offerings, Tesla is involved in driverless cars, and Apple is doing large language model work which will probably end up as enhancements to Siri. Even where they do not have direct AI offerings, their core businesses are likely to benefit from AI.

This is a very good area to invest in, but don’t expect to find a needle in the haystack. Instead, most of us should hold a variety of companies, both within and outside the Magnificent Seven.

Most likely you already have a lot of exposure to AI. If you are in KiwiSaver, your fund probably invests in the S&P 500 (which includes the Magnificent Seven). Most funds, whether actively managed or index-tracking, will hold most of the Seven and other companies as well.

Similarly, Lifetime’s fund ranges have varying degrees of exposure to the Magnificent Seven via its underlying investment managers; namely Vanguard for the Lifetime Retirement Income Fund and Mercer for Lifetime’s workplace savings schemes and QROPs.

You may want to increase your exposure by buying some other different companies. If so, make sure you do not buy just one; there will be winners from AI, but we do not know who they will be yet.

Written by: Martin Hawes

Martin Hawes is not a Financial Adviser or a Financial Advice Provider and this article is not intended to be financial advice. The views and opinions are general in nature and may not be relevant to an individual's circumstances. Before making any investment, insurance or other financial decisions, you should consult a professional financial adviser. Martin Hawes is a director and shareholder of Lifetime Income