**Paris**: Investor enthusiasm for generative AI is buoyed by developments in GPU installation. Portfolio manager Nicole Kornitzer discusses promising companies within the Buffalo International Fund, spotlighting Capgemini, SAP, and BayCurrent for their roles in tech adoption and transformation within the sector.
Investor enthusiasm for generative artificial intelligence (AI) continues to rise, primarily driven by the rapid installation of graphics-processing units (GPUs) and supporting equipment in data centres. This trend remains centred on the capabilities of companies, particularly Nvidia Corp., which leads the market. However, long-term investors are encouraged to consider the broader implications and applications of generative AI technology beyond mere hardware provisions.
Nicole Kornitzer, the portfolio manager for the Buffalo International Fund since 2009, provided insights on investment opportunities within the AI sector. Based in Paris, Kornitzer manages the Buffalo Funds through Kornitzer Capital Management, which, founded by her father in 1989, oversees approximately $7 billion in assets, including mutual funds and investments for institutional and private clients. The Buffalo International Fund itself manages around $915 million and has achieved a four-star rating in Morningstar’s “Foreign Large Growth” category, emphasising its diversified investment strategy focused on developed markets outside of the United States, with roughly 10% exposure to emerging markets.
In a recent discussion with MarketWatch, Kornitzer spotlighted three companies within the Buffalo International Fund that are positioned to leverage generative AI, each providing essential consulting, systems, or related services to aid businesses in adopting this technology.
The first of these companies is Capgemini SE, headquartered in France. Kornitzer described Capgemini as “a global consulting company that competes with Accenture PLC,” offering services that assist organisations in improving work processes, services, and product designs through technology. She noted that around 20% of Capgemini’s operations occur domestically, mentioning that investment hesitancy among French companies has been influenced by political uncertainties. “As the political situation becomes more clear, the companies should be more ready to invest,” Kornitzer commented.
Furthermore, Kornitzer expressed a positive outlook on the company’s valuation, highlighting that it is trading at historically low price-to-earnings (P/E) multiples, currently at a forward P/E ratio of 13.2, compared to its five-year average of 16.2.
Next on her list is SAP SE, a German enterprise-resources planning software provider. Kornitzer noted the significant shift of SAP’s customers from traditional licensing to cloud services, resulting in 80% of its revenue now coming from recurring sources. She classified SAP as being in “a sweet spot” due to its ongoing integration of AI agents into its primary software offerings, which is expected to enhance its efficiency and profit margins further.
Lastly, Kornitzer mentioned BayCurrent Inc., a Japanese firm focused solely on AI solutions. She described the company as “a pure play” on AI in Japan, a market still undergoing digital transformation. According to her, the standardization of data is critical for AI usage, emphasising that Japan is still on its “pathway of going through the digital transformation.”
Kornitzer then provided an overview of the forward P/E ratios and anticipated growth rates for revenue and earnings per share for these three companies, highlighting Capgemini’s lower growth expectations reflected in its P/E ratio compared to SAP and BayCurrent, which are projected to experience substantial growth in earnings and sales.
Mark Hulbert has also noted the necessity for U.S. investors to diversify their portfolios with European stocks, which are perceived to have significantly lower P/E valuations compared to their U.S. counterparts and are showing improved performance in the current year.
Kornitzer reinforced this sentiment, stating, “There are many companies doing just as well as U.S. peers but trading at cheaper multiples.” She highlighted that many prominent European firms have international business models, diminishing their reliance on domestic markets.
The potential for enhancing consumer confidence in Europe could catalyse economic growth, unlocking considerable household savings. Kornitzer referenced the implications of ongoing polling in Germany, which may lead to growth-oriented policies and improved fiscal management in France as key contributors to fostering an environment conducive to investment and spending.
Additionally, she suggested that stabilisation within the Chinese market could benefit European firms, citing Siemens AG’s increase in automation equipment orders from China as an indicator of potential recovery in the sector.
In conclusion, Kornitzer reaffirmed the importance of sustained growth in earnings per share forecasts as a central element of stock valuation, which investors monitor to guide their decisions in the ever-evolving landscape of technology investments.
Source: Noah Wire Services
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