The next biggest beneficiaries of the artificial intelligence trade could be the less-obvious names stealthily adopting new technologies, according to Nancy Tengler, CEO and chief investment officer of Laffer Tengler Investments. As the current bull market rally has broadened out, technology stocks have given up some of the massive lead they held over other sectors. Since the Nov. 5 presidential election, the Russell 2000 has added 5.4% versus the S & P 500 ‘s 5% gain during the same time period. Now, Tengler is in large part focused on investing in “old economy” companies that have pivoted to new technologies as AI beneficiaries. “Our theme hasn’t changed over the last few years, and we still think it’s early days. Our theme is the old economy companies that have pivoted to new technologies,” she told CNBC in an interview Wednesday. “In the industrials space, that would be companies that have pivoted, and then the suppliers of the picks and shovels in what we think is a fourth industrial revolution.” Tengler highlighted Walmart as a prime example. In previous earnings calls, the company has cited generative AI and robotic stocking technologies to help catalog items and stock shelves, thereby lowering labor costs. The company has also used technological advances to manage its supply chain more effectively than competitors such as Target and Kohl’s, the latter of which has “missed the boat” completely, Tengler said. Analysts are bullish Walmart across the board, with 41 out of 44 ratings on the stock equivalent to either a strong buy or buy, data from LSEG shows. Tengler also likes Home Depot , which ended last year just 2% higher but has since risen 22% in 2024, marking a stellar comeback. Similar to Walmart, Home Depot has been using AI and cloud computing to boost its e-commerce business and better manage its supply chains. “Those are the companies that we’re focused on in our portfolios and the reason for that is because we think this market and this economy is analogous to the 1990s, which was a productivity driven growth economy that drove stock prices,” Tengler said. Wall Street is similarly bullish Home Depot, with the majority of analyst ratings either a strong buy or buy, according to LSEG. Within industrials and consumer discretionary stocks, Tengler said she liked the so-called companies that provide the tools and services for the AI industry. Specific names she highlighted included Emerson Electric , as well as data center builder Quanta Services . Tengler also pointed to water treatment stock Xylem as an attractive business, since the company has data center cooling solutions and has embraced digitization to solve problems for water utilities. Financials, too, were a sector that Tengler singled out as embracing generative AI to improve productivity, with one of the most interesting use cases being fraud detection. Investors have been largely bullish on financials especially since the election. A second Trump term could boost the sector overall due to potentially less onerous regulations, which could lead to a revival in capital markets activity. The S & P 500 financials sector is up more than 5% since the election. Investing in old economy companies that use AI has been a theme for Tengler for a while. Earlier this year , she said “Generative AI is much more compelling of a story than the internet was in many ways,” in terms of boosting productivity.
