The Unknown Technology About to Change Everything
Listen to this post
But if you heard one of these claims, then went over to ChatGPT and had it write you a corny poem or a simple computer program, you probably walked away unconvinced.
It’s just a chatbot mashed up with Google search, right? What’s the big deal?
Plenty of people make this assumption. I did too, at first.
No wonder ChatGPT has actually fallen in search popularity in recent months, losing out to the broader idea of “A.I.”…
Frankly, I’m not surprised. Because ChatGPT barely scratches the surface of what A.I. is capable of.
A.I.’s killer app — the thing that will truly change the world — hasn’t landed yet.
But it is coming. Most don’t even know what it is. And the investment opportunity is still ripe for the taking.
I’m confident A.I. will prove to be the fundamental paradigm shift of the 21st century. But this shift will have nothing to do with ChatGPT.
It will have to do with an A.I. concept you probably haven’t heard about yet, but you will be hearing plenty of, very soon.
This is not a tech trend. This is not a semiconductor trend. It’s much bigger.
This is a shift in the way that any company with a product or service will do research, development, and manufacturing.
This affects Apple just as much as it does McDonalds. Exxon Mobil just as much as Skechers. Northrup Grumman just as much as Toyota.
That is to say, this affects everything.
And if you make the right moves now, you could see a fast fortune as the idea becomes reality…
Let’s talk about what exactly this is, and why it signals the true turning point into the 21st century’s new industrial era.
‘Digital Twins’ ExplainedI’m talking about “digital twins.”
A digital twin is a simulated, digital version of a physical thing. It can be a proposed design for a new fighter jet, a new type of packaging for a product, or even more abstract things like a methodology for research or a stock trading algorithm.
The advantage digital twins present is the ability to mass-test different permutations of all these things through A.I.-driven simulation.
R&D now and for all of human history has involved idea formation and hands-on tests by human beings. But now, A.I. allows us to test not just one iteration of a product, but thousands or even millions of slightly different ones under nearly every possible scenario.
This will completely upend the way companies do R&D today. Quality Assurance as a career niche is in jeopardy of being entirely replaced by A.I. digital twins that can do several lifetimes’ worth of QA work in a matter of hours, maybe even minutes.
An example should help demonstrate.
Imagine you’re a defense contractor designing a new tank for the U.S. military. The average cost to design and produce such a thing is in the tens, if not hundreds of millions of dollars. You can’t afford to get it wrong.
And think of everything you have to get right. The tank has to withstand heavy munitions fire. It has to be fast and maneuverable. It has to pack a punch of its own. It must be comfortable and intuitively operable for the combatants inside — or, if it’s piloted remotely or by A.I., it requires a robust system to enable this.
It also has to do all this under a limitless number of potential scenarios. What if an artillery shell hits the rear flank, near the fuel line? What if one of the treads is caught on a piece of rubble with exactly the right shape to render the tank a sitting duck? Can the tank move fast enough to defend from a surprise ambush?
And think of how you would traditionally test for these scenarios. You would design and build a prototype, bring it out into the field, and beat the heck out of it six ways from Sunday until you run out of ideas. Expensive, time-consuming, wasteful, dangerous.
Now, imagine you’re that same defense contractor with a digital twin of the tank you designed. You instruct the A.I. to test the tank in a virtual environment, simulating all the scenarios from above and a million more — including the ones you never thought of.
It detects every fault, every weakness, and everything you never would’ve considered before — and you didn’t have to use an ounce of physical material to create the tank. And you won’t until you know you can create something damn near perfect.
That’s the kind of efficiency we’re looking at here. And we’re looking at it for the entire realm of manufacturing.
Look around you. How many manufactured items are in your immediate surroundings? Looking at my own home office, I’m overwhelmed.
Every one of those products has the potential to be designed, tested, and streamlined by A.I. Each one represents the opportunity for a company to save millions and billions of dollars on R&D. And the ones that start using these processes soon stand to rapidly grow their margins and pass those profits on to shareholders.
But here’s the best part of this “digital twin” concept…
NOBODY Is Talking about ThisRemember that Google Trends search I showed you earlier? Let’s add one more variable.
Yes, you are reading this correctly. The search interest in digital twin technology does not even chart when compared to ChatGPT and AI.
Almost NOBODY is talking about digital twins, despite it having the highest potential impact on the business world and our everyday lives compared to any other A.I. trend.
I would not be surprised, in a year or two, if this chart looked very different.
And I would be equally unsurprised for early investors in companies using digital twin technology to be tremendously wealthy.
So where do we start?
3 Companies Using Digital TwinsDigital twin technology is still well in the early stages, itself an R&D project within the hallowed halls of the world’s biggest and most essential enterprises.
Only a relative handful of firms have written publicly about using digital twins. But in my research, I’ve found three publicly traded companies doing so today.
Let’s take a look at what they’re up to, along with their Business Quality Score and Rating, using the >Ratings by TradeSmith software.
1. Microsoft (MSFT) | $2.5T Market Cap | 32.6 P/E | 0.89% Dividend
Microsoft popping up on this list should not surprise anyone. Its $13 billion and growing partnership with OpenAI earlier this year made it perfectly clear that it intends to be an industry leader in the A.I. space.
Digital wins are already a big focus at Microsoft behind the scenes, with its Azure cloud computing service utilizing them to create large-scale simulations of factories, buildings, and even entire cities for the use of infrastructure planning.
Microsoft has taken a big step into this realm, and the stock price is being rewarded. It currently sports a Strong Bullish 81 on the Ratings gauge, indicating a bullish fundamental and technical picture.
And its Business Quality Score is a near-perfect 98.
You may be hesitant to buy into a mega-cap tech company these days. It doesn’t seem like a stock trading at a $2.5 trillion market cap and at 32 times earnings will provide much in the way of gains.
But don’t forget what Lucas Downey showed us about companies with huge cash moats. Microsoft has one of the biggest cash piles in the world, and it’s plugging it into breakthrough tech like digital twins.
(Disclosure: I recently established a position in MSFT — I know, late to the party — so I’m eating my own cooking here.)
2. Honeywell (HON) | $121B Market Cap | 22.7 P/E | 2.35% Dividend
Microsoft isn’t the only legacy tech company getting involved with digital twins. Honeywell, known for its involvement in aerospace and building technologies, is building out a digital twin solution for industrial applications.
This tool will help engineers build manufacturing plants that can optimize production and process and test new equipment.
Honeywell is a smaller company, compared to MSFT anyway, with a market cap at $120 billion. It also trades at a cheaper valuation with a P/E of 22.59.
Its Ratings gauge is somewhat weaker than Microsoft, though, at a Bullish 55.
As is its Business Quality Score of 83.
Still, for a smaller market cap company with a cheaper valuation using digital twin technology, HON is one to keep on your watchlist.
The stock also pays a strong dividend yield of 2.35%, which will help you build a bigger position over time.
3. Rockwell Automation (ROK) | $30.3B Market Cap | 21.5 P/E | 1.9% Dividend
Smaller still than MSFT and HON is Rockwell Automation (ROK).
This century-old automation company uses a mix of enterprise software and manufacturing equipment to serve large-scale industrial firms.
Today, it’s using digital twin technology in its Emulate3D software, a solution for engineers looking to design and test systems long before spending resources deploying them.
ROK also happens to be a high-quality stock, with a Strong Bullish 64 on the Ratings gauge.
And a Business Quality Score of 85.
ROK is the smallest and cheapest of the companies on this list at a 21.5 P/E ratio, and its 1.9% dividend is attractive, too. Definitely one to watch.
These three companies represent the very tip of the iceberg on the possibilities of digital twin technology. And right now, in these early stages, it shouldn’t surprise us to see tech and manufacturing firms at the bleeding edge
Once its use becomes more widespread, a much wider variety of businesses stand to benefit.
And with Ratings by TradeSmith, you can easily figure out which digital twin stocks are worth putting your money into.
High interest rates and risk-free Treasury yields mean the days of buying any old stock and waiting for gains are long behind us. Investing only in sound, capital-efficient businesses will be key to success. And the Business Quality Score and the Ratings Gauge, both part of Ratings by TradeSmith, make this easy to see at a quick glance of any stock ticker.
As a Platinum member, you already have full access to Ratings by TradeSmith along with our full suite of market tools. Check them out in your TradeSmith Finance dashboard right here.
To your health and wealth,
Editor, TradeSmith Daily