Skip to content

CONTRIBUTORS

Jonathan Curtis

Chief Investment Officer,
Portfolio Manager
Franklin Equity Group
United States

Key takeaways:

  • Investors who focus on capturing artificial intelligence’s (AI’s) investment potential solely through tech companies and infrastructure providers may miss the bigger opportunity.
  • The AI productivity revolution is already underway—forward-thinking companies in sectors across the economy are harnessing AI to expand profit margins and drive revenue growth.
  • We believe the market continues to significantly misprice generative AI’s potential value creation, particularly outside of the tech sector.
     

Why AI’s biggest investment opportunity is not in tech

Remember when everyone thought the internet was just for email? Some investors in gen AI might just be making the same mistake.

Wall Street is obsessed with who’s selling AI—semiconductor companies, copilots, chat bots—and with good reason. These companies are creating AI’s infrastructure and building the foundation on which the Intelligence Age will stand. But we think they're missing the real story as we discuss in this paper: AI isn’t just something tech companies sell. It's something every company will use to become more productive, generate new sources of revenue and grow earnings faster.

When personal computers (PCs) arrived in the 1980s, smart investors didn't just bet on IBM, Microsoft and Intel. The real long-term winners were companies that used computers to digitally transform their businesses—banks that automated transactions, retailers that revolutionized inventory management and manufacturers that streamlined operations. We believe the same thing is happening now with the application of AI, but many times faster.

Our conclusion

In 1995, if you bought the PC leaders, you did well as an investor. But if you bought the smartest companies that built competitive advantage by digitizing their business early using the PC? You probably got rich.

We believe today's AI moment is bigger. It’s faster. And it’s hiding in plain sight. The market sees AI as a tech story. Smart investors see it as an everything story. While others bid up the obvious AI plays, we think you can buy future AI winners at yesterday’s prices. The gap between current valuations and AI-powered earnings potential is significant, in our analysis. In five years, people will wonder how anyone missed it.

The only question is: Will you see it before everyone else does?

WHAT ARE THE RISKS?

All investments involve risks, including possible loss of principal.

Equity securities are subject to price fluctuation and possible loss of principal.

Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks.

Investment strategies which incorporate the identification of thematic investment opportunities, and their performance, may be negatively impacted if the investment manager does not correctly identify such opportunities or if the theme develops in an unexpected manner. Focusing investments in the health care, information technology (IT) and/or technology-related industries carries much greater risks of adverse developments and price movements in such industries than a strategy that invests in a wider variety of industries.

Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.

WF: 6198513

Copyright ©2025. Franklin Templeton. All rights reserved.

This document is intended to be of general interest only. This document should not be construed as individual investment advice or offer or solicitation to buy, sell or hold any shares of fund. The information provided for any individual security mentioned is not a sufficient basis upon which to make an investment decision. Investments involves risks. Value of investments may go up as well as down and past performance is not an indicator or a guarantee of future performance. The investment returns are calculated on NAV to NAV basis, taking into account of reinvestments and capital gain or loss. The investment returns are denominated in stated currency, which may be a foreign currency other than USD and HKD (“other foreign currency”). US/HK dollar-based investors are therefore exposed to fluctuations in the US/HK dollar / other foreign currency exchange rate. Please refer to the offering documents for further details, including the risk factors.

The data, comments, opinions, estimates and other information contained herein may be subject to change without notice. There is no guarantee that an investment product will meet its objective and any forecasts expressed will be realized. Performance may also be affected by currency fluctuations. Reduced liquidity may have a negative impact on the price of the assets. Currency fluctuations may affect the value of overseas investments. Where an investment product invests in emerging markets, the risks can be greater than in developed markets. Where an investment product invests in derivative instruments, this entails specific risks that may increase the risk profile of the investment product. Where an investment product invests in a specific sector or geographical area, the returns may be more volatile than a more diversified investment product. Franklin Templeton accepts no liability whatsoever for any direct or indirect consequential loss arising from use of this document or any comment, opinion or estimate herein. This document may not be reproduced, distributed or published without prior written permission from Franklin Templeton.

Any share class with “(Hedged)” in its name will attempt to hedge the currency risk between the base currency of the Fund and the currency of the share class, although there can be no guarantee that it will be successful in doing so. In some cases, investors may be subject to additional risks.

Please contact your financial advisor if you are in doubt of any information contained herein.

For UCITS funds only: In addition, a summary of investor rights is available from here. The fund(s)/ sub-fund(s) are notified for marketing in various regions under the UCITS Directive. The fund(s)/ sub-fund(s) can terminate such notifications for any share class and/or sub-fund at any time by using the process contained in Article 93a of the UCITS Directive.

For AIFMD funds only: In addition, a summary of investor rights is available from here. The fund(s)/ sub-fund(s) are notified for marketing in various regions under the AIFMD Directive. The fund(s)/ sub-fund(s) can terminate such notifications for any share class and/or sub-fund at any time by using the process contained in Article 32a of the AIFMD Directive.

For the avoidance of doubt, if you make a decision to invest, you will be buying units/shares in the fund(s)/ sub-fund(s) and will not be investing directly in the underlying assets of the fund(s)/ sub-fund(s).

This document is issued by Franklin Templeton Investments (Asia) Limited and has not been reviewed by the Securities and Futures Commission of Hong Kong.

Unless stated otherwise, all information is as of the date stated above. Source: Franklin Templeton.

CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.