Probably a few days ago, considering investing in artificial intelligence (AI) sounded great; It seemed like a clear commitment to the future. The ChatGPT chatbot, a delight for students and also professionals to do all kinds of work, presentations, comments or translations, was on everyone’s lips. In just five days since its launch in November 2022, it already exceeded one million users, something unprecedented in the history of technology, much faster than TikTok or Instagram. In the first two months of 2023, the figures pointed to 100 million monthly active users. It wasn’t just OpenAI’s ChatGPT; From the technological universe, various advances were announced in music, image, video or voice chatbots and the development of new applications thanks to AI in areas such as coding and the development of softwaredata security, education, medicine and a long etcetera.
For a few days, however, the world has been experiencing a new financial tsunami caused by the bankruptcy of Silicon Valley Bank (SVB) that has not only instilled fear in the bodies of a large part of investors regarding the banking sector and their health, but also in everything that surrounds the world of technology, the start-ups or the creative AI (or generative AI) typical of this type of chatbots, so fashionable.
All in all, and despite the many precautions that must be taken in times of uncertainty and volatility like the current ones, the experts consulted do not doubt that in the future there will simply be more AI, which will impact practically all economic sectors and, therefore, this may be a good time to, in the long term, channel a part of the investment portfolio towards this field. Always, yes, assuming a significant level of risk and volatility in the short term.
Tobias Rommel, Manager at DWS Artificial Intelligence, is convinced that “actively managed funds are the best vehicle for investing in a complex and rapidly evolving space like AI”. In his view, “a carefully selected portfolio of companies that benefit from AI could generate significant alpha (above-market return) compared to an overall portfolio, as AI winners will be disruptors of status quo, potentially altering existing competitive positions and even revolutionizing entire industries. Despite these expectations, Rommel points out that “AI companies tend to be investments of growth (growth), so they are more volatile than the market in general, since they are susceptible to changes in growth expectations or discount rates. It is, as he explains, “an appropriate investment for long-term investors who follow a savings plan and regularly invest a certain amount of money, benefiting from the average cost effect.”
Alison Porter, Head of Strategy Management global technology leaders and sustainable future technologies in Janus Henderson, acknowledges that the coming of age of AI is getting closer and, “although we are entering a period of hype cycle (overexpectation)”, investors should take a long-term view, “as use cases are in the early stages of evolution, while AI application costs are increasing exponentially”. In his opinion, practical formats will take time to evolve, and more improvements are needed in terms of user experience / interface – which the next iteration GPT-4 could bring – as well as paths towards monetization.
“While AI and ChatGPT offer exciting opportunities, there are also regulatory hurdles to overcome until large-scale adoption occurs,” he explains, adding that “investors should focus on understanding the adoption curve and focus on realistic return expectations, not only in revenue growth derived from use cases.” Still, he believes that “there is significant opportunity for hyperscalers like Amazon Web Services, Microsoft Azure, Google Cloud Platform, and Meta to accelerate the deployment of AI processes for their own applications, and in the long run this will create competitive challenges across a wide spectrum. of application software providers.
Johannes Jacobi, Senior Product Specialist and Director of Allianz Global Investors, is convinced that there will be more AI in the future and that it will be talked about a lot throughout 2023. “Investment in this field continues to be a priority for companies in many industries and sectors, who are looking for ways to improve their competitive positioning and growth prospects,” he explains. For Jacobi, it is not, therefore, just about technology itself, but about its use and application in all fields; from advertising, agriculture, automotive, retail, finance, health, automotive… For this reason, he believes that investing now in this AI environment must go “beyond the technology itself to be part of the next history of economic growth.
Aware that the volatility in the prices of companies in this segment is already significant, and will probably continue in the coming months, “AI is a risky investment, which must be oriented in the long term,” he says. In his opinion, this could be a positive moment to take positions because the price corrections experienced by many of the companies linked to this environment have been very significant. “We found opportunities both in the United States and again in China, another of the world’s technology centers,” he concludes.
Own names
It is true that all the experts recommend taking positions in companies linked to artificial intelligence or in others belonging to those sectors that are or will be promoted by it through investment funds, basically due to the difficulties posed by their selection and analysis. Apart, of course, from the risk they carry and the fact that, according to analysts, probably not all of them will obtain positive results in this area. They are, however, also aware that it may be tempting for investors, although the risk is significantly higher, to approach them directly.
Here, in alphabetical order, without going into any type of valuation, a non-exhaustive list of companies, American and Asian, that today are relevant in the world and in the AI environment: Advanced Micro Devices, Alibaba, Alphabet , Amazon, Baidu, Broadcom, Cloudflare, Elevance Health, Enphase Energy, Intuitive Surgical, Meta, Microsoft, Nvidia Corporation, ON Semiconductor, Palantir Technologies, Schneider Electric, Taiwan Semiconductor, and Tesla, among others.
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