Three significant beneficiaries of the AI boom and beyond

James Harries, co-manager of the Trojan Global Income Fund, selects three stocks that show promise beyond the AI boom's hype

The US, which dominates the global equity markets and is greatly impacted by the AI boom, is becoming more and more fragile. Thus, a single overarching theme is presented to a large number of investors. By boosting the stock market and increasing consumption through the wealth effect, the enormous sums of money being spent on developing AI infrastructure benefit the US economy.

AI and the US now control the majority of global equities, making markets extremely expensive and concentrated. There will be a significant impact if this expenditure is questioned and eventually kept to a minimum given the uncertain returns on capital.

In the meantime, investors have tried to quantify how AI will affect specific companies. In general, hardware firms have been positioned as the obvious winners (see Nvidia), while numerous software companies have suffered because of the perceived risk of disruption.

Although AI is a game-changing technology that will change economies, we project that this impact will take years to materialize, indicating that investors have placed too much emphasis on the immediate consequences. It's possible that this "hardware good, software bad" dynamic will reverse if interest in AI declines and investment is reduced. We see this as a fantastic opportunity.

These three low-risk stocks have long-term potential despite the AI boom.

Accenture and ADP are two firms that we believe meet the criteria. The defensive, superior compounder Automatic Data Processing (Nasdaq: ADP) holds a leading position in the global payroll and management software market. Its enormous scale, in-depth regulatory knowledge, and high switching costs support steady revenue growth and excellent client retention. Long-term, low-risk investors find ADP appealing due to structural tailwinds like outsourcing, workforce complexity, and cloud adoption, which support consistent mid-single-digit growth. We believe that rather than suffering, AI deployment may actually help.

Accenture (NYSE: ACN) is a world leader in digital transformation and IT consulting. Long-term structural tailwinds that help it include cloud migration, the adoption of data and AI, cybersecurity, and efforts to increase business efficiency. Strong free cash flow underpins steady capital returns, while a mostly variable cost base supports margin flexibility over cycles. It is a high-quality compounder over time due to its execution history and exposure to mission-critical spending. We anticipate that AI will increase demand for Accenture's services and boost profits as it permeates the global economy.

A different but appealing opportunity that has nothing to do with AI is Novo Nordisk (Copenhagen: NOVO-B), a leader in anti-obesity drugs. We believe that the stock's 70 percent decline in just 18 months is due to overly pessimistic perceptions of pricing and competition pressures rather than any long-term franchise impairment.

In a structurally appealing but underserved global obesity market that is predicted to grow over the next ten years, Novo is still by far the number two player. Despite outstanding returns on capital and robust cash generation, Novos' valuation has dropped to 13 times earnings at the lowest points in history.

It looks promising with new leadership, strategic pricing changes to increase access (especially with oral GLP-1s), and a reliable next-generation pipeline headed by CagriSema. When growth normalizes starting in 2027, sentiment and expectations have surpassed fundamentals, presenting an alluring entry point with asymmetric upside.