Why culture could be AI’s ultimate compass

We think culture is always important in the future of companies' success, but we think in times of significant change, culture becomes even more important.

I was looking for underappreciated change. So, when AI first came along and you had the ChatGPT moment in early 2023, we obviously looked at Nvidia quite closely. But we also asked, if Nvidia plays out, who else would benefit? Where are the bottlenecks in the system? And through that, we'd found multiple sources of underappreciated change, starting in areas like networking, later on storage, later on memory, and ultimately labor being the ultimate bottleneck when you think about blue collar labor, like electricians, and mechanical engineers are in short supply, especially in the United States.

So, this kind of theme of always looking for underappreciated change has allowed us to find eclectic companies, not just in technology but in areas like industrials. We think culture is always important in the future of companies' success, but we think in times of significant change, culture becomes even more important.

Take the notion of adaptability. This is one of the hallmarks of how we think about corporate culture, and when you think about how companies are going to adopt AI to separate their competitive advantage, we think adaptability becomes paramount, and that requires lots of qualities within that, whether it's external awareness, internal candor, and the willingness to use AI internally and change.

And so, we think culture will prove to be an enormously important compass to guiding us through the AI era. We believe this is a very unique cycle. Unlike previous cycles that are driven by macro considerations like housing and interest rates, we think the thematic of AI is not just driving the tech sector, it's driving many economic considerations around the world, including GDP growth.

As there are more vested interest and more themes tied to AI, we think this creates the potential for many second order effects. So in our view, really understanding your AI exposure, not just within technology, but beyond that, is incredibly important. While we believe AI is very exciting as a thematic for investors, market history will tell you when everyone is focused on one pocket of the market, the opportunity tends to be elsewhere.

So, while at WCM we're incredibly excited and we are invested in the AI thematic, we're increasingly looking outside of that and finding exciting opportunities elsewhere. And many of these opportunities lie in unique pockets of the market, such as senior housing, aerospace and defense, subsea CapEx.

Areas that the market is not paying as much attention to as everyone is so lasered in on this singular AI thematic. We believe the market might be underappreciating that the volatility we've seen in recent times may continue for quite some time. Both changes in market structure as far as who's driving incremental flows and the rise of thematic and AI-driven trading, we think point to more correlations we're seeing across various subcategories, themes, and baskets that can create whip saw effects as it relates to stock prices.

So having an increasingly nimble approach and being ready to act in a low-friction, low-bureaucracy culture as we have at WCM, we think will prove to be a growing advantage over time.