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Chip stocks power the growth of AI capabilities

Fidelity Portfolio Manager Bill Bower says certain semiconductor manufacturers are well-positioned to meet growing demand from companies looking to enhance their products by integrating artificial intelligence capabilities.

“The development and rollout of artificial intelligence is only in the early stages of what I believe will be a multiyear and multidecade runway of growth,” says Bill Bower, portfolio manager of Fidelity® Diversified International Fund (FDIVX). “As the technology becomes more widely adopted, I expect there to be huge demand for increased computing power and for the semiconductors that facilitate that power.”

In managing the fund since 2009, Bower has established a solid long-term track record of performance relative to the fund’s benchmark, the MSCI EAFE Index, by favoring high-quality businesses with durable or improving growth, particularly those benefiting from competitive advantages.

AI—the ability of machines to collect enormous data sets to perform tasks with human-like intelligence—has been at the forefront of headline news in recent months after years in the making. Some examples of current consumer uses of AI include: apps Google Maps and Waze, which recommend travel routes; Netflix and Amazon.com, which recommend what media programs to watch or buy; and Forgemytrip, a website that builds customized travel itineraries.

“Many businesses in a wide range of industries are making significant investments to capitalize on AI when developing new products,” Bower contends. “Semiconductors play a key role in helping them sift through data to develop products, and I believe a select group of chipmakers are likely to be key beneficiaries of this technology’s growth.

The fund had outsized exposure to semiconductors & semiconductor equipment stocks as of October 31, a stance Bower has maintained for some time.

Among the fund’s top individual overweights was ASML Holding (ASML), also the fund’s largest position. Other notable holdings included Taiwan Semiconductor Manufacturing (TSM), NXP Semiconductors (NXP), and Marvell Technology (MRVL). In Bower’s view, these chip companies are well-positioned to benefit from burgeoning demand for AI, as well as from a variety of end markets.

“What I love about the tech sector is that there is constant development and innovation,” says Bower. “The AI products that exist today will be replaced by superior and more powerful products in a year or two. Semiconductors are adopted by end-market customers in a variety of industries—whether it’s an auto manufacturer, a financial company, or a cement factory, to name a few—where companies need the latest technology to be as efficient as possible, increase productivity, reduce costs, and maintain their own market share and revenue growth.”

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Bill Bower
Bill Bower
Portfolio Manager

Bill Bower is a portfolio manager in the Equity division at Fidelity Investments.

In this role, Mr. Bower manages Fidelity and Fidelity Advisor Diversified International Fund and Fidelity Advisor Global Capital Appreciation Fund.

Prior to assuming his current responsibilities, Mr. Bower managed various other Fidelity funds, including Fidelity International Discovery Fund and Fidelity Select Construction and Housing Portfolio. He also co-managed Fidelity Overseas Fund.

Before joining Fidelity in 1993, Mr. Bower was a commercial real estate loan officer at Michigan National Bank. He has been in the financial industry since 1989.

Mr. Bower earned his bachelor of science degree from Western Michigan University and his master of business administration degree from the University of Michigan.

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