In this segment from Industry Focus: Tech podcast, The Motley Fool's Eric Bleeker and Dylan Lewis explain why FANUC's unique deep learning technology is so exciting, and why it presents such a huge long-term opportunity for the company.
Also, the hosts go over some important things that investors need to be aware of before buying into a goliath company like Amazon.com (NASDAQ: AMZN) or Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) for AI exposure.
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A full transcript follows the video.
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This video was recorded on Jan. 5, 2018.
Eric Bleeker: Let's take that to a second level. iRobot that would be my consumer play. On a more industrial side, I'll talk about FANUC, which is a Japanese company.
Dylan Lewis: How do you spell that?
Bleeker: FANUC. And I never know of my pronunciation on these things. But they are a tremendously run company. I think their P/E at any given time is in the mid-30s, but their operating margins are incredible for the industry they function in. They have long tenured and relatively visionary leadership. This company has been a stalwart. But, they go on to a potentially fundamentally new plane, and that's because they built this FIELD software technology system as an Internet of Things play. They want to connect all their software together, so you can update it, blah blah blah, fix potential flaws really quickly. But what it does now is allows basically all of the robots to learn together. So your robots become a hive mind, and you use some of these new deep learning techniques to improve robots, their ability to use machine vision to pick things out, to have better agility, all those things that a human presently does that a robot can't do. And what it does, like I said, is their technology allows all the inputs from the robots to go back to a hive mind to learn to make better and push it out. So, they're always getting exponentially better in a way that wasn't possible, and recreating. I think this company is having the platform for that stands a potentially tremendous opportunity. And it's one most investors don't know.
Lewis: Yeah. Well, I didn't know it, so I'm glad you mentioned it. So, they are primarily working in industrial manufacturing.
Lewis: And basically any business that would have a fleet of robots working toward some kind of task. Maybe it's in fulfillment, with shipping centers, or something like that?
Bleeker: Yeah. Right now, there are two main markets, electronics and automobile manufacturing, those are their largest. But over time, their robotics will go down to cheaper levels. Right now, it costs six figures. And they use this really antiquated software program to do very precise movements. What happens in the future, it's kind of like cars, if you want some precisely program it, a self-driving application is extremely limited. But if you can teach it to learn, it's exponentially better. And the same thing will happen with robots, and that's kind of the software they own.
Lewis: So, we talked about two, not quite pure-plays, but maybe companies that could benefit a little bit more from an AI future in a way that would transform them. I think something that's worth noting with some of these big tech companies that are heavily investing in AI, I'm thinking specifically about Google and maybe Amazon here, is that it's really tough to pinpoint what AI will be for their business. It's not an operating segment for them. It's something that's kind of an operational efficiency that should bleed into almost everything they do. So, as you're looking at some of the investments that big tech is making in this space, realize that it's not going to be broken out like a nice little line item that has a profit and loss. It's going to be something they say in the conference call where they're like, "We reduced our energy usage and our servers by 40%, and that saved us $2 billion."
Bleeker: Yeah. And I believe it allows them to attack fundamentally different futures. For example, Google with self-driving cars, and how they might try to crack that problem in a number of ways, which could be extremely substantial. I think mobility as a service could be a trillion-dollar industry. With Amazon, I believe it allows them to fundamentally rethink their entire supply chain. The only thing that allows self-driving cars, drones, etc, is these advances in artificial intelligence. So, if Amazon, led by the smartest man in the world, for all we know, with Jeff Bezos, if he understands exactly where this technology is going to lead in five years, he's already thinking ahead that maybe fulfillment centers, as they're currently constructed, you move those up closer to consumers, you have all these automated tasks, and that allows you to actually begin delivering in a lesser time for cheaper than someone getting in their car and driving to the store. And maybe that's your final death knell of retail. So I believe in both these cases, artificial intelligence allows completely new businesses that these companies are uniquely equipped to foresee.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Dylan Lewis owns shares of Alphabet (A shares) and Amazon. Eric Bleeker owns shares of Alphabet (A shares), Amazon, and iRobot. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and iRobot. The Motley Fool has a disclosure policy.