AI – What is it and how to view the social, business and investment opportunities.

By Sue Stewart: GDipBus (Personal Financial Planning), CFPCM
Financial Adviser – Investments.

According to Chat GPT, ‘AI refers to the development of computer systems or machines that can perform tasks that typically require human intelligence. These tasks can include problem-solving, learning, reasoning, perception, understanding natural language, and decision-making.

AI systems are designed to mimic human cognitive abilities, but they often operate in different ways. Some AI systems are rule-based and follow predefined instructions, while others use machine learning algorithms to improve their performance over time by analysing large amounts of data. Machine learning allows AI systems to recognize patterns, make predictions, and adapt to new information without explicit programming.’

Artificial Intelligence is an exciting tool that will boost technology and, I suggest, will become ingrained in our lives in many different ways than we can currently imagine.  I reiterate that it is a tool – not a solution. AI is essentially a supersize search engine without a conscious or the ability to apply critical thinking or creative intelligence i.e., what is actually appropriate in any given circumstance.  It does not have the ability to provide personal judgement or novelty of thought.

AI intelligence has been likened to that of a jellyfish.  Having said this, it does however take large amounts of information/data, process this through computer power and natural language systems, to take the information coming back to the user to a higher level. One of the standout advantages of its analytical powers is that through its machine learning, AI can detect patterns that we wouldn’t otherwise identify or know to look for.  And it can do this very quickly!

While AI uses historical data and research as the basis of its learning, it is also able to take this information and provide likely forward-looking outcomes, or most likely paths of reality.  

An example of this is the benefits AI offers medicine, as it can take previous data from millions of patients to predict a range of possible differential diagnosis, rating these in hierarchy as to the most likely, and then identify most likely remedies.  From this however, the clinician still needs to overlay their own clinical observations and experience to identify the relevance of each possibility.

AI is however essentially a commodity because it is open source (and therefore readily available to everyone) to integrate into various applications to aid industries, businesses, and services. Of course, there is a broad spectrum of both complexity, performance, and effectiveness, as well as ways this technology may be applied.  

Therefore, the benefits of AI are likely to accrue to humanity by being integrated into existing systems over time, and while many of the social benefits can be readily identified, the financial benefits to any particular company are much harder to quantify.  We do however know there will be winners (with efficiency gains as companies can do more with less resources) and losers (online education services for instance as students turn more to AI!).  This does not necessarily mean increased job losses however, as experience over time shows us, economies adapt and find new roles for people rather than just destroy jobs.  

How to invest in AI developments?  The prime users of AI will be major tech companies (i.e., Alphabet, Microsoft, Apple) so they offer a great sustainable exposure to the benefits of AI. It stands to reason that Alphabet (Google) is investing heavily in AI research and development, as AI plays a significant role in many of their products and services such as Google search, Google Assistant, AI driven advertisements, autonomous vehicles etc. Microsoft is also attempting to gain more market share here and has spent approx. $10bn on AI, which sounds a lot but only translates to 5% of their annual revenue.    

Over recent months there has been a lot of focus on semiconductor companies such as Nvidia Corporation as an exposure to AI, with its price moving from $108 to $480 over the last 12 months!  However, less diversified companies such as Nvidia are more susceptible to market cycles.

Like many, we will be watching the AI space develop with interest, knowing that client’s investments in this space are being managed by highly experienced managers that have formed their opinion over years of experience and in-depth research that we as individuals cannot compete with.